West Mercia Safetywear Ltd v Dodd

[1988] BCLC 250

Ratio Decidendi

When a company is insolvent or nearing insolvency, the directors' duty to act in the interests of the company shifts to include the interests of creditors.

Facts

A director of an insolvent company transferred £4,000 to a related company to reduce its overdraft, which was personally guaranteed by the director.

Judgment Summary

The Court of Appeal held the director liable for misfeasance. When a company is insolvent, directors must have regard to the interests of creditors, not act for their personal benefit.

Key Quotes

"Where a company is insolvent, the interests of the creditors intrude."
— Dillon LJ

Subsequent Treatment

Applied

Followed in BTI 2014 LLC v Sequana [2022] UKSC 25, which confirmed the creditor duty.