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decisions. 150 Therefore, directors must maintain supervision and monitor the
company‟s status, and, if necessary, review plans and decisions they have made.
Directors whose company is having financial difficulties may decide to subject it
to formal insolvency proceedings. The Cork Committee had recommended
actions such as liquidation, receivership or administration be taken by directors
whose company was facing financial problems. 151 Unlike the Australian insolvent
trading provisions, 152 section 214(3) does not specifically cite formal insolvency
proceedings as one of the factors for the courts to take into account when
deciding whether a director has succeeded in his defence. In spite of that, in Re
Farmizer (Products) Ltd 153 a liquidator only seeks contributions for the alleged
wrongful trading up until the date the administration order was made. This gives
the indication that directors who opted for formal insolvency proceedings may be
able to limit their liability if not be totally absolved from it.
Likewise in Australia, there is no guarantee that a director who puts a company
under administration proceedings will be free from liability; it depends on the
time and result of such action. Due to the specific provision in the statute, 154 the
court in Australia is obliged to take the matter into consideration, while in the UK
it is left to the discretion of the court.
Insolvency law has always been in favour of rescuing and reorganisation of the
company with winding up as the last option. The Cork Committee in its report
has highlighted that one of the benefits of floating charge is the ability of its
holder to appoint a receiver and manager. He or she is given extensive powers to
manage the business of the company and in some circumstances may be able to
150 Oditah above n52 at 208-209.
151 Cork Report above n5 at [501].
152 See section 588H(9) of the Australian Corporations Act 2001- „In determining whether a
defence under subsection (5) has been proved, the matters to which regard is to be had include,
but are not limited to:
(a) any action the person took with a view to appointing an administrator of the company; and
(b) when that action was taken; and
(c ) the results of that action.‟
153 [1997] 1 BCLC 589.
154 See section 588H(9) of the Australian Corporations Act 2001.
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