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ARTICLE · 19 JUNE 2024

BHS Judgment – Wrongful Trading, Trading Misfeasance And Key Takeaways

Travers Smith LLP
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A recent judgment held former BHS directors liable for wrongful trading and the first-ever misfeasance trading claim. This underscores directors' duties during insolvency, emphasizing the need for vigilance and adherence to fiduciary responsibilities in financially distressed situations.

United KingdomInsolvency/Bankruptcy/Re-Structuring
Edward Smith
Edward Smith
Polly Richard
Polly Richard
Kirsty Emery
Kirsty Emery
Katherine Barrett
Katherine Barrett
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Judgment was handed down last week on the substantial directors' duties and wrongful trading claims brought against former directors of various BHS companies1. The liquidators of those companies were successful in arguing that the directors were liable for wrongful trading (albeit at the latest date of six possible dates argued) and were also successful in bringing the first ever claim for "misfeasance trading"2. Whilst the judgment is very fact specific, it is an interesting analysis of so-called "insolvency-deepening" activity and shareholder value extraction. Moreover, it is a salient reminder to directors of their duties where they are operating in the zone of insolvency.

In this article, we outline some of the claims brought by the liquidators and suggest some key takeaways for directors where a business is facing distress.

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