Q&As

A company director directs that the company’s debtors pay to him directly the debts due to the company. Where the debtors do so, does that operate to discharge the debtors’ obligations to the company, or can a subsequently-appointed administrator of the company pursue those debtors who would then in effect be paying twice? Do the debtors have any potential defence?

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Published by a ³ÉÈËÓ°Òô Restructuring & Insolvency expert
Published on: 01 June 2017
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In answering this Q&A, we have made the following assumptions:

  1. •

    the debts in question were Ordinary business trade debts due to the Company

  2. •

    the debts had not been assigned by the company to the director, whether expressly or impliedly

  3. •

    the director’s direction, and payment of the debts to him, occurred prior to the company entering into administration

Further, as you appear to have disregarded any claim(s) against the director, we make no reference to any such potential claim(s).

The starting point is that the debts were contractually due to the company and therefore formed part of the company’s assets—accordingly the company could (subject to its articles and putting to one side any future challenge in insolvency)

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Jurisdiction(s):
United Kingdom
Related legal acts:
Key definition:
Company definition
What does Company mean?

Company denotes an association of individuals formed together for some common purpose.

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