Directors liable for legal costs in company winding-up proceedings

In Re Fountain Street Development Limited, the Royal Court ordered individual directors, and not the company, to pay the legal costs of a shareholder led winding-up application that was sought on "just and equitable" grounds.

The Court relied on the leading English Court of Appeal case, re Aurum Marketing Limited [2000], to justify its departure from the standard order, that costs of such applications are treated as costs in the winding-up and found that the company directors were liable as a result of their conduct and resistance to the application. The cost liabilities for the directors (who were not legally represented) are likely to be significant. For practitioners, the case provides a timely reminder to advise clients of the Court's powers to sanction directors who exercise close control of companies to the detriment of shareholders.