Claim for unlawful dividends not time barred

Broadside Colours and Chemicals Ltd

Here the company made loans to the directors each year (then unlawful by virtue of s330 Companies Act 1985, now permissible if approved by shareholders according to procedures under sections 197 - 199 Companies Act 2006) which were later discharged by application of annual dividends.

The liquidators' application for repayment was made under section 212 of the Insolvency Act, which in essence provides that liquidators may apply to the court for a summary remedy (eg an order for repayment) against any director who has been guilty of any misfeasance or breach of duty in relation to the company.

The court confirmed that the six year limitation on actions applied when taking action against fiduciaries but not where seeking the recovery of trust property. The money represented by the loans was trust property and those loans not discharged by lawful dividends must be repaid.

Go back

Subscribe to our RSS feed