UK Supreme Court rules on dishonest asset transfers during liquidation

The UK Supreme Court has considered whether a director who dishonestly transferred assets after the company entered liquidation is liable as a fiduciary for the value of the assets even though they were worthless by the time of the trial.

Background

MBI International & Partners (the Company) acquired 891,761 shares in JJW Hotels & Resorts Holding Inc (JJW Inc). The Company went into liquidation in 2011 but in 2016, a director (whose power to deal with its assets had ceased because of the liquidation), dishonestly transferred the 891K shares to JJW Guernsey. Straight after the Company's liquidators obtained court recognition in the UK, the same director caused JJW Inc to transfer all of its assets to another group company, meaning that the shares in JJW Inc became worthless. 

Decision

The Court of Appeal initially held the director breached his fiduciary duty but reduced compensation to zero, because loss was to be assessed at the date of the trial and by then the JJW Inc shares were worthless . The Supreme Court reversed this, ordering the director to pay the value of the JJW Inc shares at the time of their transfer out of the Company - €67 million. 

The Court held that the director owed a fiduciary duty to the Company which he breached in effecting the 2016 share transfer and that a wrongdoing fiduciary cannot rely on subsequent events he participated in to reduce his liability.

Key takeaways 

Where a fiduciary, such as a director, has some role in events that affect the value of assets he has misappropriated, he has responsibility to account for and explain what happened to the assets.

The risk that the directors' actions in relation to the assets results in the value of those assets decreasing should fairly be allocated to the fiduciary and not the Company. 

Find out more 

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

Mitchell (Joint Liquidators of MBI International & Partners Inc (In Liquidation)) v Sheikh Mohamed Bin Issa Al Jaber)(No 2) [2025] UKSC 43