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Duties which James has breached

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Duties which James has breached

Section 212 of the Insolvency Act 1986 defines what constitutes misfeasance. Misfeasance is defined as misapplication, retention, or being accountable for the company’s property. James’ action to divert funds to his account goes contrary to conventional law and principle of misfeasance. James also breaches the duty of care to the creditors because the amount of money that James had diverted could be used to compensate the affected individuals.

Duties which James has breached

  • Duty of trust

As a company’s employee, James has a duty of trust to the company. In this case, the company entrusted James to conduct business on behalf of the company and not going against the company. In so saying, James’ decision went against the expectation of the company, and the company has an obligation to sue to recover all the amount which James had acquired illegally.

  • Duty of Care to the creditors

As a director, the creditors expected James to act in their best interest. Unfortunately, James decided to put its interest first and, by so doing, directed some payments to his bank accounts, which is legally wrong because the unsecured creditors had not to be compensated, and the amount recovered should have been used to compensate them or reduce their claims on the assets. As a director of the company, James understands that law must be followed even after the company is liquidated, and the recovered amount should be used to compensate creditors in order of hierarchy from top to bottom without bypassing others in between.

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