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Buachaill
Buachaill, Barrister
Category: Law
Satisfied Customers: 10530
Experience:  Barrister 17 years experience
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The company lawyer is holding £20,000 of the company's funds

Resolved Question:

The company lawyer is holding £20,000 of the company's funds in a client account. The company is insolvent and will need to go into a CVA with the shell being bought by a third party. The company lawyer is also the company secretary and has been aware of the company's insolvent position for the best part of a year and has through this time been holding off having its bills settled whilst the company worked toward a solution. Does the lawyer have the right to take these funds to settle it's own bills ahaead of any other creditors. If the directors approve the lawyer to take these funds are they following their fiduciary duty?
The funds were being held by the lawyer as a deposit for a transaction that has unwound.
The company is is a failed Oil & Gas Exploration PLC, listed on a junior London stock exchange
Thank you
Submitted: 1 year ago.
Category: Law
Expert:  Buachaill replied 1 year ago.
1. When a company is insolvent the nature of a director's fiduciary duties change. Directors then owe a duty not only to the company but also to its creditors. Part of that duty to creditors includes a duty to treat all creditors fairly and not to prefer one creditor over another. Here, if the directors pay the debts of the company secretary out of the assets of the company, before that of other creditors, then the directors are preferring thedebts of an insider - the company secretary - over the debts of the other external creditors.
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Customer: replied 1 year ago.
Thank you, ***** ***** clear.
Expert:  Buachaill replied 1 year ago.
2. Essentially, the directors would be preferring the debt of an insider to all other creditors and this is a breach of fiduciary duty.