Author
Lorna Bramich

Lorna Bramich

Senior Associate

Read More
Author
Lorna Bramich

Lorna Bramich

Senior Associate

Read More

7 July 2022

R&I Update - July 2022 – 3 of 6 Insights

When do UK company directors have authority to begin proceedings?

  • Quick read

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. 

Call To Action Arrow Image

Latest insights in your inbox

Subscribe to newsletters on topics relevant to you.

Subscribe
Subscribe

Related Insights

Aerial view of railroad tracks
Restructuring & insolvency

Can a UK liquidator claim breach of duty against a director when the company has been fined for the same misconduct?

5 August 2022
Quick read

by Lorna Bramich

Click here to find out more
Safety Deposit boxes storage in a Bank vault
Restructuring & insolvency

UK government report on CVAs - landlords are broadly equitably treated but there could be improvements

5 August 2022
Quick read

by Lorna Bramich

Click here to find out more
Road Markings
Restructuring & insolvency

UK special administration for a company subject to Russian sanctions

9 June 2022
Quick read

by Lorna Bramich

Click here to find out more