Insolvency Act 1986, section 212

Summary remedy against delinquent directors, liquidators, etc

Part IV Winding Up of Companies Registered under the Companies Acts

(1)This section applies if in the course of the winding up of a company it appears that a person who—

(a)is or has been an officer of the company,

(b)F453has acted as liquidator . . . or administrative receiver of the company, or

(c)not being a person falling within paragraph (a) or (b), is or has been concerned, or has taken part, in the promotion, formation or management of the company,

has misapplied or retained, or become accountable for, any money or other property of the company, or been guilty of any misfeasance or breach of any fiduciary or other duty in relation to the company.

(2)F454,F454The reference in subsection (1) to any misfeasance or breach of any fiduciary or other duty in relation to the company includes, in the case of a person who has acted as liquidator . . . of the company, any misfeasance or breach of any fiduciary or other duty in connection with the carrying out of his functions as liquidator . . . of the company.

(3)The court may, on the application of the official receiver or the liquidator, or of any creditor or contributory, examine into the conduct of the person falling within subsection (1) and compel him—

(a)to repay, restore or account for the money or property or any part of it, with interest at such rate as the court thinks just, or

(b)to contribute such sum to the company’s assets by way of compensation in respect of the misfeasance or breach of fiduciary or other duty as the court thinks just.

(4)F455The power to make an application under subsection (3) in relation to a person who has acted as liquidator . . . of the company is not exerciseable, except with the leave of the court, after [F456heF456] has had his release.

(5)The power of a contributory to make an application under subsection (3) is not exercisable except with the leave of the court, but is exercisable notwithstanding that he will not benefit from any order the court may make on the application.

Definitions used in section 212 2

the company

2 Section 233B does not apply in relation to a contract for the supply of goods or services to a company (“the company”) where any of paragraphs 3 to 11 applies.

Defined in Sch.4ZZA para.2 · see it in the full Act
contributory

(1) In this Act . . . the expression “contributory” means every person liable to contribute to the assets of a company in the event of its being wound up, and for the purposes of all proceedings for determining, and all proceedings prior to the final determination of, the persons who are to be deemed contributories, includes any person alleged to be a contributory.

Defined in s.79(1) · see it in the full Act

Cases considering section 212 138

R (on the application of Palmer) v Northern Derbyshire Magistrates’ Court and another

[2023] UKSC 38 · 1 November 2023

The provision separately identifies company officers, administrators and other persons concerned in management. This distinction demonstrates that managing a company does not itself confer officer status (see paras [23]-[24]; [51]).

Holland v The Commissioners for Her Majesty’s Revenue and Customs and another

[2010] UKSC 51 · 24 November 2010Interprets

The section supplies a summary procedural remedy but creates no substantive duty. A claimant must establish that the respondent falls within the section and has committed an independent misfeasance or breach of duty (see paras [21]; [38]; [49]-[51]; [55]). The subsection identifies the persons against whom the misfeasance procedure may be used. HMRC therefore had to prove that the respondent was an officer of the operating companies (see paras [21]; [38]). The relevant statutory category was a person who was or had been an officer of the company. It required proof that the respondent was a de facto director of each operating company (see para [38]). Lord Hope considered that the subsection permits adjustment of the amount payable after liability is established, including limitation to a particular creditor’s deficiency. It does not permit the court to extinguish liability altogether (see paras [49]; [51]).

Moore Stephens (a firm) (Respondents) v Stone Rolls Limited (in liquidation (Appellants)

[2009] UKHL 39 · 30 July 2009Defines

The provision supplied a procedural misfeasance remedy against present or former officers but did not create a cause of action where none otherwise existed. The speeches differed over whether an auditor’s alleged breach could be pursued through that procedure. (see paras [108]–[112]; [190]) The provision was used to identify an auditor as an officer capable of being the subject of a misfeasance application, although the majority stressed that an auditor’s independent role differs from that of directors and managers. (see paras [110]–[112]; [190]) Lord Scott considered that the liquidators could have brought a misfeasance application against the controlling wrongdoer for breach of duty to the company. (see paras [108]–[110]) Lord Scott noted that the provision conferred a discretion concerning compensation and could have supported substantially the same recovery sought in the negligence proceedings. (see paras [108]–[112])

118 more judgments, and what each says about section 212, are in the case-law panel in the full Act.

Amendments and notes

9 notes from legislation.gov.uk

Amendments

  1. F453Word in s. 212(1)(b) repealed (15.9.2003) by 2002 c. 40, ss. 248(3), 278, 279, Sch. 17 para. 18(a), Sch. 26 (with s. 249(1)-(3)(6)); S.I. 2003/2093, art. 2(1), Sch. 1 (subject to arts. 3-8 (as amended by S.I. 2003/2332, art. 2))
  2. F454Words in s. 212(2) repealed (15.9.2003) by 2002 c. 40, ss. 248(3), 278, 279, Sch. 17 para. 18(b), Sch. 26 (with s. 249(1)-(3)(6)); S.I. 2003/2093, art. 2(1), Sch. 1 (subject to arts. 3-8 (as amended by S.I. 2003/2332, art. 2))
  3. F455Words in s. 212(4) repealed (15.9.2003) by 2002 c. 40, ss. 248(3), 278, 279, Sch. 17 para. 18(c)(i), Sch. 26 (with s. 249(1)-(3)(6)); S.I. 2003/2093, art. 2(1), Sch. 1 (subject to arts. 3-8 (as amended by S.I. 2003/2332, art. 2))
  4. F456Word in s. 212(4) substituted (15.9.2003) by 2002 c. 40, ss. 248(3), 279, Sch. 17 para. 18(c)(ii) (with s. 249(1)-(3)(6)); S.I. 2003/2093, art. 2(1), Sch. 1 (subject to arts. 3-8 (as amended by S.I. 2003/2332, art. 2))

Modifications

  1. C625Ss. 206-215 applied (with modifications) (4.1.2024) by S.I. 2021/716, Sch. 1 para. 3 (as amended by The Payment and Electronic Money Institution Insolvency (Amendment) Regulations 2023 (S.I. 2023/1399), regs. 1(2), 20)
  2. C651S. 212 applied (with modifications) (1.12.1994) by S.I. 1994/2421, art. 4(2)(3)
  3. C652S. 212 applied (with modifications) (17.2.2009 for certain purposes, otherwise 21.2.2009) by Banking Act 2009 (c. 1), ss. 103, 263(1)(2) (with s. 247); S.I. 2009/296, arts. 2, 3, Sch. para. 2
  4. C653S. 212 applied (with modifications) (6.6.2013) by The Collective Investment in Transferable Securities (Contractual Scheme) Regulations 2013 (S.I. 2013/1388), Pt. 3 reg. 1, Sch. 2 paras. 3, 5 Table (with reg. 24)
  5. C654S. 212 applied (with modifications) (8.7.2021) by The Payment and Electronic Money Institution Insolvency Regulations 2021 (S.I. 2021/716), regs. 2, 37 (with reg. 5) (as amended (4.1.2024) by S.I. 2023/1399, regs. 1(2), 4, 11)