Wednesday 6 November 2019

UK: England and Wales: the new compensation order and disqualified directors

Earlier this month judgment was given by ICC Judge Prentis in Secretary of State for Business, Energy And Industrial Strategy v Eagling [2019] EWHC 2806 (Ch). The case is important because it is the first to consider an application by the Secretary of State for a compensation order under sections 15A and 15B of the Company Directors Disqualification Act 1986. A

The case concerned a director, Kevin Eagling, in respect of whom the Secretary of State had sought (and gained) a disqualification order under section 6 of the 1986 Act. Disqualification was for 15 years. In addition to disqualification, the Secretary of State also applied for a compensation order under which, in general terms, Mr Eagling would be required to pay a fixed amount of compensation to certain identified creditors and a further sum to be available to the general body of creditors.

The compensation order sought by the Secretary of State was granted. ICC Judge Prentis viewed the compensation order regime as being new and free-standing and it required interpretation as such. He also rejected as misplaced the criticisms that had been made of the new regime, including the argument that the new regime - alongside the existing insolvency law regime - would permit double recovery. Such criticisms also overlooked, in his view, the role of the court in exercising discretion as to whether to grant an order and on what terms.

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