Owners of collapsed firms given wider scope to seek redress
Business owners whose companies have collapsed are set to be able to directly sue wrongdoers involved in the collapse, following a Supreme Court ruling, writes Rachel Millard.
For decades the rule against reflective loss has prevented shareholders from making an individual claim outside of the formal insolvency process. But in a key case, Supreme Court judges found that the rule did not apply to claims made by creditors or guarantors.
That paves the way for business owners who provided loans and personal guarantees to the company to make a claim. The ruling was made after an appeal brought by Marex Financial, which had been prevented from recovering debts from a business owner.
The all-party group on fair business banking had intervened in the case to argue for greater powers for business owners. It had raised the example of businesses harmed by RBS’s disgraced GRG unit.
Toby Starr, of law firm Humphries Kerstetter, said: “The detail of this judgment will lead to a review of many lower court decisions and will enable creditors who have lost out to consider bringing claims at the High Court.”