Directors and shareholders have many duties to the company which are based on trust and confidence in the directors in running the company.
These duties are set out under various legislation, and corporate governance codes. For a more detailed discussion of these duties see informative pages on directors fiduciary duties.
These duties are owed by any director or person occupying the position of the director. This includes
- registered directors; and
- de facto or shadow directors
Amongst the fiduciary duties that a director owes to the company are the duties to act within the powers conferred on them by the company’s constitution, to avoid a conflict of interest, to act in the best interests of the company, not to fetter one’s own discretion, and not to make unauthorised profit.
For some directors, these duties become blurred, and particularly if a director is a director of several companies where sometimes conflicts of interest arise between the needs of both companies.
If a company director deliberately diverts business from one company to another, then this will be in direct breach of not only the duty to avoid conflict. but also the duty not to make unauthorised profit and to act in the best interest of the company.
Diversion of business and assets by a director
If a director causes a diversion of business from one company towards another company, or a diversion of assets from one company to another, or indeed to themselves or a connected party, then this not only will be considered as a breach of duty but can also be a criminal act on the part of the director.
If guilty of deliberately diverting money from a company, then a company director can be subject to very serious penalties personally, for breach of duty, for a civil for an action in fraud, and potentially other criminal penalties, depending on the intention and the act.
Breach of director’s duties
There are serious personal liability penalties for a director breaching their company duties even if there is not a criminal element. They can be personally liable to compensate or restore the company’s position if a claim is brought against them for diversion of business or assets from the company. For more detail – read our pages relating to claims against directors.
Apart from breach of duty, a company can bring a claim against a director in these circumstances by way of a civil action for fraud if for example, they are guilty of
- unjust enrichment;
- dishonest assistance;
- inducing breach of contract;
- knowing receipt, conspiracy; or
- fraudulent misrepresentation, among others.
If you believe a director may have diverted assets or business in breach of their duty to your company, then don’t delay in taking advice. Our expert fraud solicitors are specialists in all types of fraud and freezing injunction cases. Our team at Francis Wilks & Jones have many years’ experience in this area and can advise you on a range of options.
If a company director may be diverting assets, then it is possible to apply to court for a freezing injunction to safeguard those assets. This relies on acting quickly and it is not a remedy that the court will likely undertake given the damage it might cause and the impact it has. However, it is a remedy that is possible in certain circumstances. At Francis Wilks & Jones our team has proven track record of success in this area. If this is something affecting you, contact us immediately. The quicker we can act for you, the more chance of asset recovery.
If you have any concerns about a director diverting monies or assets or business from your company then please contact us immediately and we can go through the options with you. Remedies may involve criminal proceedings or an action to reclaim assets or making an emergency application to freeze assets so that they cannot be moved. Whatever the situation it is important to act quickly to be able to recover assets rightly belonging to a company. Contact one of our expert team at Francis Wilks & Jones today.
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