Misfeasance is the misapplication of money or company
property. As far as directors of a company are concerned, misfeasance is
considered a breach of fiduciary duty. For directors facing a misfeasance
claim, there are certain steps that must be taken.
Step 1: Respond to the claim letter without delay
When you receive a letter of claim, be sure to deal with it
straight away. The liquidator will expect a response within a particular time
period. If you fail to respond within this time then you could face court
proceedings, the costs of which could be very damaging. You should however not
respond on a whim and without taking legal advice, because doing so could
scupper your chances of minimising the impact of any claim.
Step 2: Take
Professional Advice
Misfeasance claims can be for considerable sums of money
which could be seriously damaging for a business. It is therefore essential to
seek specialist legal advice as early on as possible. You should never respond
to a claim before you take such advice. This is your opportunity to clearly
present the facts of the situation. With a well-structured response, you will
stand a much better chance of avoiding the claim altogether, or at very least,
mitigating the consequences.
Step 3: Arrange to
Meet the Liquidator
If you can sit across the desk from the liquidator and
discuss your circumstances and put across a good case (as assisted by your
solicitor) then your chances of a more advantageous outcome will be boosted.
Step 4: Decide What
You Want to Achieve
It may be that you are intent on completely denying the
claim and you wish to have it set aside. Then again, you may be satisfied to settle
the claim in part, with the goal of minimising the amount being claimed.
Some directors are happy to accept the claim in full and
settle with as little hassle and time spent as possible. If you are in
agreement with most of the claim being made, or you just want everything to be
settled quickly, you may be best advised to settle early. Sometimes the
liquidator will accept a payment plan for settlement over a period of time.
If you wish to completely defend the claim, you will need to
be realistic. It is going to take time and money to reach a settlement. Some
claims can take up to two years to reach even a final hearing, with costs
spiralling as more time passes.
Next Steps
Whatever you decide to do, be sure to take professional
advice. You’ll need an accountant and a lawyer who specialises in misfeasance
claims. Be sure to choose one with particular skills in negotiation and
strategy planning. Why not ask your local bookkeepers if they can recommend
anyone?
