Key Takeaways
- Directors who breach their duties by transferring company assets to themselves can be held personally liable for the full loss, as shown by the £77 million judgment in Wood & Adam v Khumalo.
- Ignoring or not responding to court proceedings does not protect directors from liability or enforcement, even if they live abroad or use offshore trusts.
- The Royal Court of Jersey confirmed that claims for a transaction at an undervalue and for breach of directors’ duties can succeed where there is no proper documentation or value given for the transfer.
- Liquidators can claim for transactions at undervalue within up to two years of insolvency or five years if the transfer is to a connected person under Article 176 of the Companies (Jersey) Law 1991.
- When a company is insolvent, directors must put creditors’ interests first and may face even stricter obligations according to the Sequana principle.
- Creditor action can restore struck-off companies and trigger powerful recovery claims, so acting quickly is vital for anyone owed money or holding concern over director conduct.
- If you delay in seeking advice or ignore warning signs, you risk losing the chance to challenge asset transfers or defend claims effectively.
- The absence of clear documentation and justified valuations weighs heavily against directors and can lead courts to draw adverse inferences about improper conduct.
- Our solicitors at Go Legal have expertise in director misfeasance, cross-border asset recovery and defending or pursuing claims for breach of directors’ duties. Early and specialist legal support is essential for directors, creditors, and shareholders who want to enforce their rights or reduce their risks following a breach of duty.
If you need practical advice about director liability, asset recovery or creditor enforcement, book a free consultation with our commercial litigation team.
What Happens When Directors Breach Their Duties and Transfer Company Assets?
On 30 July 2026, the Royal Court of Jersey handed down a landmark judgment in Wood & Adam v Khumalo and Ors [2026] JRC 202, ordering two directors to pay £77 million for breach of directors’ duties and for a transaction at undervalue. The directors, who used offshore trusts and refused to engage with the proceedings, were nevertheless held fully accountable.
This pivotal case sets out the serious risks facing directors who transfer company assets to themselves, fail in their fiduciary obligations, or think that residing abroad or using complex trust structures will shield them from liability. Whether you are a director, creditor, liquidator or shareholder, the takeaways are direct: documentation, transparency, and responsible conduct are essential.
Directors and stakeholders must appreciate that non-response, poor record-keeping, or misuse of assets can result in personal liability for the entire loss. For clarity on your position, or to act quickly where company ownership is in doubt, call 0207 459 4037 or book a free consultation with our expert lawyers.
What Counts as a Breach of Directors’ Duties Under Jersey and English Law?
A breach of directors’ duties means a director has failed to act in the company’s best interests or has abused their powers for personal gain, or has failed to meet the accepted standard of care and diligence. Under Jersey and English law, such actions can mean direct personal liability for losses, especially where company assets have been redirected to directors without full value in return.
In Wood & Adam v Khumalo and Ors [2026] JRC 202, the court held that transferring a valuable subsidiary from the company to a director for no consideration was a clear, fundamental breach of duty. The result was a £77 million order for payment against the directors.
To learn more, see our article on breach of directors’ duties.
What Are the Fiduciary Duties of Company Directors?
Directors owe core fiduciary obligations, built on loyalty and the duty to act honestly, which are designed to protect the company above all personal interests.
What Statutory Duties Apply to Directors of Jersey and English Companies?
Jersey directors must comply with Article 74 of the Companies (Jersey) Law 1991, which covers duties of good faith, proper purpose, and managing conflicts of interest. In England & Wales, directors face corresponding duties under the Companies Act 2006, sections 171 to 177:
- Act within powers: obeying the company’s constitution and not exceeding authority.
- Promote the success of the company: acting in good faith for the long-term benefit of shareholders, but also considering factors such as employees, suppliers, the environment, and the reputation of the company.
- Exercise independent judgment: making their own decisions, not merely following others.
- Exercise reasonable care, skill, and diligence: keep up to professional and reasonable standards.
- Avoid conflicts of interest: removing themselves from situations where personal interests could clash with the company’s.
- Not accept benefits from third parties: refusing gifts or benefits creating conflicts.
- Declare interests in transactions: disclosing personal interests to their fellow directors.
These obligations are owed to the company itself, regardless of shareholding structure or ultimate beneficial ownership.
If you want further practical guidance, the GOV.UK guide to being a company director provides a helpful overview.
How Do Duties Change When a Company Is Insolvent?
Once a company becomes unable to pay its debts, directors must give priority to creditors’ interests above the wishes of shareholders. At this stage, any self-interested transaction (such as asset transfers to directors) risks personal liability. In Wood & Adam v Khumalo, asset stripping while the company was insolvent led directly to a massive damages order.
How Can Directors End Up Personally Liable for Company Losses?
Directors may be held personally liable for misuse of property, exceeding authority, or failing to carry out statutory duties. This risk is significantly sharper if the company is insolvent, as asset transfers might be reversed, and compensation can be ordered for the full value.
Can a Director Be Sued for Transferring Company Assets to Themselves?
Absolutely. Directors who benefit personally from company asset transfers without documentation or fair value are exposed to claims from:
- The company (if under independent or liquidator control)
- Liquidators (in insolvency)
- Shareholders or creditors, in limited statutory circumstances where losses are clear and company action is blocked
Wood & Adam v Khumalo illustrates how improperly transferring the main company asset to a director, with no paperwork or value paid, made the individuals personally liable for millions.
Who Can Bring a Claim for Breach of Directors’ Duties?
Ordinarily, the company brings claims for breach of duty, but if under director control or insolvent, liquidators assume this power. In certain cases, shareholders or creditors can bring derivative claims, though these are rare and subject to court oversight. In most insolvency situations, liquidators act on behalf of all creditors.
Does Using an Offshore Trust or Living Abroad Protect Directors from Claims?
No. The court looks through legal structures such as offshore trusts or changes of residence to focus on who controls and benefits from the assets. In Wood & Adam v Khumalo, transferring shares to a New Zealand trust and moving overseas did not prevent a substantial court award.
For more on this subject, see our guide on directors’ duties, fiduciary obligations and breach under the Companies Act 2006.
What Is a Transaction at an Undervalue and When Can It Be Challenged?
A transaction at an undervalue occurs when a company disposes of assets for less than their full commercial value, often while insolvent and typically to directors or connected parties.
What Counts as a Transaction at an Undervalue in Jersey Company Law?
According to Article 176 of the Companies (Jersey) Law 1991 and as demonstrated in Wood & Adam v Khumalo, a transaction is at an undervalue where:
- The company transfers assets, incurs liabilities, or provides services
- In exchange for no value or significantly inadequate value, causing detriment to the company
This can be challenged if the company was insolvent at the time (or became insolvent as a result), or where insiders like directors are involved. English law has a similar test under the Insolvency Act 1986, section 238.
How Do Liquidators Unwind Transactions Made for Less Than Market Value?
A liquidator can ask the court to reverse transactions at an undervalue to restore money or assets to the creditors. They must show the transaction happened within the relevant period and that no equivalent value was received. If the requirements are met, the court may order restitution or compensation.
For more practical information, see our guide on Insolvency & Transaction at Undervalue.
What Evidence Do You Need to Prove a Breach of Directors’ Duties or a Transaction at an Undervalue?
Clear evidence is often decisive. Courts expect directors to keep and produce board minutes, payment details, underlying agreements, and correspondence, especially for large or self-interested transfers.
Why Does Documentation and Transparency Matter in Director Claims?
A lack of proper documentation leads courts to draw negative inferences. In Wood & Adam v Khumalo, there were no records of the asset transfer. The court inferred the absence of value and personal benefit, awarding the full amount claimed. Good record-keeping is a director’s best defence.
Can Ignoring Legal Proceedings Help Directors Avoid Responsibility?
Disregarding legal claims never makes the problem go away. On the contrary, courts may award swift and decisive judgment if directors do not engage or respond, making enforcement abroad easier.
What Happens if Directors Do Not Respond to Claims or Court Papers?
Where defendants ignore proceedings, especially when properly served, courts can grant summary judgment if the claimant’s evidence is clear. In Wood & Adam v Khumalo, summary judgment of over £77 million was granted on the merits to assist enforcement overseas, drawing on the approach from Duferco SA v CVG Ferrominera Orinoco CA [2021] EWHC 824 (Comm).
Summary judgment means the court has determined the claim based on the facts and law. This creates a stronger judgment for cross-border enforcement than default judgment, which may be easier to challenge.
How Do Cross-Border Enforcement and Offshore Trusts Affect the Collection of Judgments?
Winning a judgment is just the beginning; enforcing against assets held abroad or in trust arrangements adds complexity. Courts and liquidators use various legal mechanisms, but success remains possible even with offshore structures.
Can Judgments Against Jersey or Offshore Directors Be Enforced Worldwide?
Enforcement routes depend on the country:
- In England & Wales, Jersey money judgments can be registered in the High Court and enforced as if English judgments.
- In Switzerland, although there is no automatic recognition, a judgment on the merits (like summary judgment) stands a better chance of recognition in local courts.
- In South Africa or New Zealand, a similar practical approach applies—summary judgment on the substance is viewed more favourably.
Do Family Trusts or Nominee Structures Protect Directors from Asset Recovery?
Courts regularly “look through” trusts and nominee arrangements to assess who ultimately controls and benefits from the asset. In Wood & Adam v Khumalo, the family trust set up in New Zealand was ineffective at shielding the director, as he controlled it and stood to gain.
What Laws and Deadlines Apply to Breach of Directors’ Duties and Transactions at Undervalue?
Claimants and defendants alike must be alert to the time limits and formalities that govern these issues.
Jersey Main Articles
- Article 74, Companies (Jersey) Law 1991: Sets out directors’ fiduciary duties of good faith and care, proper purposes, avoidance of conflicts, and diligence.
- Article 176, Companies (Jersey) Law 1991: Allows liquidators to challenge and unwind transactions at undervalue.
- Article 157A, Companies (Jersey) Law 1991: Governs creditor-driven winding-up.
English Statutory Duties
- Companies Act 2006, sections 171 to 177: Standardise and codify the principal duties of directors, obligations closely mirrored in Jersey law.
Procedural Rules
Service of claims and summary judgment applications in Jersey is governed by Royal Court Rules, which set out the forms of service and steps required when a defendant is outside the jurisdiction and what happens if they do not respond.
Time Limits
- Article 176 undervalue claims usually must be brought within 2 years of insolvency, or within 5 years if the transaction involves a connected party.
- Article 74 duty breach claims are subject to general limitation periods—delays risk losing the ability to claim.
- Companies struck off the register can be restored if assets or claims exist, but fast action is essential.
What Do the Courts Say About Directors’ Breaches, Undervalue Transactions, and Enforcement Against Non-Residents?
Leading case law shows courts take a robust approach to directors’ wrongdoing and cross-border enforcement.
| Case | Facts | Outcome | Why It Matters |
|---|---|---|---|
| Wood & Adam v Khumalo and Ors [2026] JRC 202 | Directors transferred company’s 84% holding in Metallon to themselves, then into a New Zealand trust, with no payment, while insolvent. Did not defend. | Summary judgment for £77 million for breach of duty and undervalue transaction. | Reinforces directors’ personal risk for self-dealing, and courts’ willingness to enforce cross-border. |
| Re Mumtaz Properties Ltd [2011] EWCA Civ 610 | Directors failed to provide transaction records. | Negative inference against directors, supporting claimant’s case on missing evidence. | Document gaps in self-dealing transactions are fatal for directors. |
| Duferco SA v CVG Ferrominera Orinoco CA [2021] EWHC 824 (Comm) | Non-participating defendant in English proceedings. | Summary judgment granted to claimant for ease of enforcement. | Strategy for facilitating cross-border enforcement when defendants do not respond. |
| BTI 2014 LLC v Sequana SA [2022] UKSC 25 | Directors paid out of an insolvent company. | Duties prioritise creditors as company approaches insolvency. | “Sequana principle” increases creditor protections once insolvency threatens. |
Our Approach to Breach of Directors’ Duties and Cross-Border Asset Recovery
Our solicitors have extensive experience handling breach of directors’ duties and asset tracing disputes in England & Wales and across major offshore centres. We provide:
- Strategic mapping: We help liquidators, creditors and shareholders develop a clear plan for asset recovery and enforcement, using all available procedures.
- Evidence preservation: We ensure vital documents, board minutes and records are preserved, to bolster your case or defend against challenging claims.
- Deadline management: Our team proactively monitors statutory and procedural time limits to maximise claims and minimise the risk of technical defences.
- Global coordination: We work with leading Jersey and offshore lawyers so your claim is brought in the right forum, and its outcome can be enforced wherever the assets are held.
If you want affordable, expert support in a cross-border or directors’ duties dispute, our company law services are here to help.
Frequently Asked Questions
What is Article 74 of the Companies (Jersey) Law 1991?
Article 74 sets out the fiduciary duties and duties of care, skill, and diligence owed by directors of Jersey companies. It is comparable to sections 171 to 177 of the Companies Act 2006 in England and Wales. Directors must act in good faith for the company’s benefit, exercise powers for proper purposes, avoid conflicts of interest, act independently and use reasonable care and skill. Breaches make directors personally liable for resulting losses.
What is a “transaction at an undervalue” under Jersey law?
A transaction at an undervalue happens when the company transfers assets, gives services or takes on obligations without getting fair value in return. Under Article 176, liquidators can apply to set aside transactions occurring within 2 years before insolvency, or within 5 years if to a director or connected person. This is similar to section 238 of the Insolvency Act 1986 in England.
Can directors be personally liable for transferring company assets to themselves?
Yes. In Wood & Adam v Khumalo, directors moved the company’s main asset (84% of a valuable subsidiary) to themselves for no payment while insolvent. The court held this was both a transaction at an undervalue (Article 176) and a breach of fiduciary duty (Article 74), ordering them to pay £77 million. Directors cannot treat the company as their personal property.
What is the Sequana principle and does it apply in Jersey?
The Sequana principle, from BTI 2014 LLC v Sequana SA [2022] UKSC 25, means that when insolvency is present or near, directors must prioritise creditors’ interests. The Jersey Royal Court in Wood & Adam v Khumalo saw strong arguments to recognise this principle, even though it did not make a final ruling. Practically, Jersey directors should assume they owe duties to creditors as soon as insolvency looms.
Can liquidators pursue directors who do not defend proceedings?
Yes. If directors ignore proceedings, as happened in Wood & Adam v Khumalo, the court will still consider the evidence and can grant summary judgment for the full amount claimed. Non-participation does not protect directors and can make international enforcement easier.
What evidence must liquidators provide to prove a transaction at undervalue?
Liquidators need to prove the transaction happened, what the company gave, what (if anything) it received in return, and that insolvency applied at the time or as a result. If with a connected person, the lookback period is longer. If directors cannot provide supporting records, courts may draw negative inferences based on the missing evidence, following the approach in Re Mumtaz Properties Ltd.
Can Jersey judgments be enforced in England, Switzerland, or other jurisdictions?
Generally, yes. In England & Wales, Jersey judgments can be registered in the High Court. In Switzerland and other countries, a summary judgment (on the merits) is usually more readily enforced than a default judgment, but local requirements apply. Liquidators may need to bring fresh proceedings for recognition, but a well-founded judgment helps significantly.
Don’t Ignore Directors’ Duties: £77m Lessons from Jersey
The Wood & Adam v Khumalo case demonstrates the consequences for directors who misuse their powers or transfer company assets for no value. Even sophisticated offshore structures and deliberate silence in the face of legal claims do not shield directors from personal accountability. Liquidators, creditors and shareholders have strong remedies under Jersey and English law, and courts are prepared to enforce large judgments across borders.
If you are a director facing allegations, a liquidator pursuing assets, a creditor with concerns about asset-stripping, or a shareholder seeking to protect your investment, you need specialist legal advice as soon as possible.
Our commercial litigation and insolvency solicitors at Go Legal can:
- Pursue or defend claims for breach of duty,
- Unwind transactions at undervalue,
- Enforce judgments internationally,
- Protect your interests as a director, liquidator, creditor or investor.
