Commercial

Directors making agreement entitling assets to be paid to certain creditors to detriment of others - agreement tantamount to informal winding up of company - directors in breach of duty to the companyMacPherson and another v European Strategic Bureau Ltd CA: (Peter Gibson, Chadwick and Buxton LJJ): 31 July 2000

In 1989 the claimants and L.

set up the company.

In 1991 the claimants decided to leave the company and a revised shareholders' agreement provided for fees received after 28 February 1991 to be applied in the following order: in payment of accrued liabilities; in repayment of the loans made by the first claimant; in repayment of loans made by L.

By cl.8.4 any surplus was to be distributed between the claimants and L.

in the proportions 25:25:50 as payment for consultancy services provided by them to the company.

Under that provision each claimant successfully claimed 35,853.94.

The company appealed.

Pushpinder Saini (instructed by Thomson Snell & Passmore, Tunbridge Wells) for the claimants.

Robert Hantusch (instructed by Bristows) for the company.

Held, allowing the appeal, that the directors of a company who caused it to enter into an agreement whereby the assets to which the company was then entitled were to be applied in making payments to certain creditors - including the directors and including payments for past services under a liability assumed under the agreement itself - to the exclusion of other creditors and without making any provision (other than for consultancy services to be provided by the parties themselves) for the cost of bringing the existing contracts to fruition or of recovering any moneys due under them, were in breach of duty to the company since the transaction was not for the benefit or to promote the prosperity of the company but to effect an informal winding up of the business; that the agreement was not enforceable and the claimants were not entitled to the moneys under cl.8.4.