When do UK company directors have authority to begin proceedings?

In Rushbrooke UK Ltd (the Company) v Designs Concept Ltd (Designs) [2022] EWHC 1110 (Ch), the Court struck out injunction proceedings to restrain the presentation of a winding up petition as the instructing director did not have Company authority. 

Background 

• Designs was owed £19,880 by the Company for outstanding invoices.  It presented a statutory demand and then petitioned for the Company's winding-up. 
• There was a breakdown of the relationship between the two Company directors who were also co-owners.  
• Director A considered the Company insolvent and supported the winding-up petition.    
• Director B instructed solicitors to issue an injunction application to restrain presentation of the petition.  His authority to do so was determined as a preliminary issue. 

Decision 

• A limited company can act only by its officers and in accordance with its constitution. 
• This typically permits the delegation of powers to a committee, managing director or other executive director.  No such delegation applied here, and no board resolution had been passed authorising the start of proceedings. 
• The principle that directors cannot take advantage of their own breach of duty to block proceedings against them, which may help in these types of scenarios, did not apply as the proceedings involved a dispute between the Company and a third party. 
• Director B had no authority and the injunction application was struck out. 

Key takeaways 

Directors who begin proceedings on behalf of a company without actual authority face the prospect of those proceedings being struck out.

Find out more 

To discuss the issues raised in this article in more detail, please contact a member of our Restructuring & Insolvency team.