0370 270 6000

already registered?

Please sign in with your existing account details.

need to register?

Register to access exclusive content, sign up to receive our updates and personalise your experience on brownejacobson.com.

Privacy statement - Terms and conditions

Robin Hood's merry men ordered to pay compensation for wrongful trading

6 August 2015

A case was brought by the liquidators of Robin Hood Centre PLC against the former directors for wrongful trading, alleging that the directors knew that there was no reasonable prospect of the company avoiding insolvent liquidation following certain events, such as the year end accounts which showed a loss and a letter from HMRC in 3 May 2007 confirming a VAT liability.

The court held that once the director’s knowledge as to the company’s insolvency has been established, the onus is on the director to show that he had taken every step to minimise the potential loss. The liquidators had to prove knowledge of insolvency at some time before the start of the winding-up, rather than at a particular date. Section 214 of the Insolvency Act 1986 (IA) did not require proof of insolvency at the date of knowledge. In this case, applying the reasonably diligent director test in s.214(4) IA, when weighing up the adverse consequences of liquidation against the potential benefits of trading meant that the directors had taken the correct action by continuing to trade from February 2007. However, by the time of receipt of the 3 May 2007 letter, circumstances had changed and the company was unlikely to make the next rent payment. At that point, the director had failed to take every step to minimise the losses.

As such, the directors were ordered to pay compensation based on the difference between a hypothetical liquidation on 3 May 2007 and the actual date of liquidation.

This case serves as a warning for directors that they need to tread carefully when a company is on the brink of insolvency.

related opinions

IR35 changes - six months and counting...

In his 2018 Autumn Budget, the then Chancellor, Phillip Hammond, announced a significant change to the way liability for IR35 breaches will be dealt with for private sector companies from April 2020.

View blog

Court of Appeal confirms all employment tribunal judgments must be published on the register, except in national security cases

Under the ET Rules, all judgments and accompanying written reasons must be published on a pubic register which the general public can access online.

View blog

Marriott International: a look behind the ICO’s £99m fine and what this means for corporate acquisitions

Last month, the Information Commissioner’s Office (ICO) announced notice of its intention to fine (NOI) Marriott International, Inc. £99m for infringements of the GDPR.

View blog

Supreme Court backs employers seeking to enforce restrictive covenants: Tillman v Egon Zehnder Ltd

The Supreme Court in Tillman v Egon Zehnder Ltd has determined that where post-termination restrictive covenants (i.e. “non-compete” clauses) in employment contracts go further than reasonably necessary to protect an employer’s business interests, it can apply the ‘blue pencil test,’ severing the offending words and leaving the remaining enforceable clause in place.

View blog

mailing list sign up

Select which mailings you would like to receive from us.

Sign up