Monday, 24 September 2012

UK: England and Wales: director found to have breached section 172 of the Companies Act 2006

A copy of the High Court decision Odyssey Entertainment Ltd. v Kamp [2012] EWHC 2316 (Ch) was added to the BAILII database last Friday although the judgment was given in early August. This decision is noteworthy because of the judge's finding that a director had breached the statutory duty to promote the success of the company found in section 172 of the Companies Act 2006. Amongst other things, the director was found to have misled the company's board regarding the company's viability (which influenced the decision to put the company in liquidation) and had pursued opportunities that probably would have gone to the company. The director was also found to have breached section 175 of the 2006 Act. In the course of judgment, the trial judge observed (at para. [214]):

"... it seems to me that where a director has decided or is even seriously contemplating carrying on a business similar to that carried on by the company and is recommending the closure of the company's business, the legal obligation of good faith under s.172 will not be met by remaining silent about that fact or serious possibility."

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