''Re Paycheck Services 3 Ltd'' or is a

UK insolvency law United Kingdom insolvency law regulates companies in the United Kingdom which are unable to repay their debts. While UK bankruptcy law concerns the rules for natural persons, the term insolvency is generally used for companies formed under the ...

and company law case, concerning

misfeasance Misfeasance, nonfeasance, and malfeasance are types of failure to discharge public obligations existing by common law, custom, or statute. The Carta de Logu caused Eleanor of Arborea to be remembered as one of the first lawmakers to set up the ...

Facts

Mr Holland set up several composite companies that paid salaries and dividends to its contractors as if they were employees and nonvoting shareholders, so as to reduce the amount of

tax A tax is a compulsory financial charge or some other type of levy imposed on a taxpayer (an individual or legal entity) by a governmental organization in order to fund government spending and various public expenditures (regional, local, or n ...

they paid, but not load them with the administrative burdens if they set up themselves as companies. However the tax scheme failed because the result of the share structure was that Holland was in control of them and they were associated for tax purposes, each was liable for high

corporation tax A corporate tax, also called corporation tax or company tax, is a direct tax imposed on the income or capital of corporations or analogous legal entities. Many countries impose such taxes at the national level, and a similar tax may be imposed at ...

and the companies went insolvent. Holland was the director of another company which itself was the director of those companies, and the Revenue was the sole remaining creditor. It claimed Holland was liable under

Insolvency Act 1986 The Insolvency Act 1986c 45 is an Act of the Parliament of the United Kingdom that provides the legal platform for all matters relating to personal and corporate insolvency in the UK. History The Insolvency Act 1986 followed the publication and ...

section 212 to account for dividends as they were misapplied or Holland was guilty of misfeasance or breach of fiduciary duty, and for that Holland needed to be treated as a ''de facto'' director.

Judgment

Lord Hope, Lord Collins and Lord Saville held that because the parent company and Holland were separate legal persons, simply acting as a director of a corporate director was not enough to make Holland a ''de facto'' director. Holland needed to have assumed responsibility in relation to the subject companies, but he had only discharged his duties as director. If he was the "guiding mind" then that would be true in all cases of corporate directors. Lord Walker and Lord Clarke dissented and would have held that if Holland deliberately procured dividend payments he was a ''de facto'' director of the composite companies and owed them a fiduciary duty.

Notes

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References

* United Kingdom insolvency case law Supreme Court of the United Kingdom cases HM Revenue and Customs 2010 in United Kingdom case law United Kingdom taxation case law

Facts

Judgment

See also

Notes

References