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If the director in question has a higher standard of knowledge, skill and
experience than ordinary reasonable directors, then he or she will be judged on
the higher individual standard. However, the standard applicable to the director
will be the reasonable standard if he or she possesses lower knowledge, skills and
experience. This will ensure that the minimum standard of a reasonable director
is maintained. This issue was discussed in the case of Re Produce Marketing
Consortium Ltd (No 2). 138 The minimum standard of knowledge expected from a
reasonable director occupying the same function varies depending on the size of
business and the nature of the business. 139
The case provided that directors are deemed to have the necessary knowledge of
the information that ought to have been obvious to them had the company
complied with the requirement of maintaining proper accounts. 140 Thus, in
assessing directors‟ knowledge, the information should not be restricted to
materials the directors have before them but also extend to those which should
have been available to them.
10.3.2.4 Defences
The burden is on the liquidator to show at which point before the commencement
of winding up that the director knew or ought to have concluded that there were
no reasonable prospects of the company avoiding insolvent liquidation. 141 Once
this has been proved, the burden shifts to the director to show that he has taken
every step he ought to have taken. 142 The director must convince the court that
138 [1989] BCLC 520.
139 Re Produce Marketing Consortium Ltd (No 2) [1989] BCLC 520 at 550- Knox J stated that “ It
follows that the general knowledge, skill and experience postulated will be much less extensive
in a small company in a modest way of business, with simple accounting procedures and
equipment, than it will be in a large company with sophisticated procedures.”
140 [1989] BCLC 520 at 550.
141 See section 214(2)(b) of the UK Insolvency Act 1986.
142 See section 214(3) of the UK Insolvency Act 1986- „ The court shall not make a declaration
under this section with respect to any person if it is satisfied that after the condition specified in
subsection (2)(b) was first satisfied in relation to him that person took every step with a view to
minimising the potential loss to the company‟s creditors as (assuming him to have known that
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