Goodwill as a company asset

The liquidator of SC1 brought a misfeasance application under s212 Insolvency Act against the respondent director, Caroline Stanbury (CS) on the basis that she had transferred the business of SC1 to SC2 for no consideration in breach of her director’s duties.

However, the goodwill from the personal styling business belonged to CS not SC1. CS had started her personal styling business as a sole trader, she did not acquire her skills in personal styling, her global fashion connections or her select group of personal styling clients through the incorporation of SC1 or her directorship of it. CS had these skills, connections and clients already, before SC1 was incorporated. Clients came to CS personally, because of her personal talent, her reputation and her connections. They wanted to be styled by CS alone. 

The goodwill generated by the business was in fact generated by CS personally. CS had not misused company property in the form of business opportunities or trade secrets. There was no contractual obligation for CS to work for SC1 and the business and clients were hers. All material value lay in CS’s personal goodwill, which was hers to do with as she wished. When CS ceased working for SC1 its business and purpose came to an end as it had no business without CS.

The liquidator’s claims of misfeasance and unlawful distribution of capital failed.

Mark Simon Reynolds (as liquidator of CSB123 Limited) v Caroline Stanbury

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