Director liable for losses following fraudulent transfer of shares post-liquidation

In the recent Supreme Court decision of Michell v Al Jaber [2025] UKSC 43. the Court held that the director of the liquidated company (MBI International & Partners Inc (in Liquidation)) (MBI) was personally liable to compensate the liquidators of MBI for losses arising as a result of a 2009 share transfer.

The facts of the matter were that MBI had acquired 891,761 shares in JJW Inc (a company associated with the director) in 2009 across two transactions. Consideration for the shares was payable on demand, although in reality no payment was ever made under the share purchase agreements. 

MBI was wound up in October 2011 and at the time of the winding-up MBI remained in possession of the 891,761 shares in JJW Inc.

In February 2016, after the director’s authority in relation to MBI had ceased, and without the knowledge of the liquidators, the director executed two undated share transfer forms purportedly on behalf of MBI, transferring the shares to JJW Guernsey (another company associated with the director). 

Subsequent to the transfer, the value of the JJW Inc shares had been devalued to zero following a 2017 transfer of JJW Inc’s assets and liabilities. 

In proceedings before the lower Courts, the liquidators had brought claims against the director and JJW Guernsey on the basis that the 2016 share transfers were void and that MBI had suffered losses as a result of the director and JJW Guernsey’s actions. 

In the first instance, the Court found in favour of the liquidators, found the director to have been in breach of his fiduciary duties to MBI, and held him and JJW Guernsey liable for the value of the shares which were valued by the first instance judge in the amount of €67,123,403.36.

The Court of Appeal upheld the finding that the director had been in breach of his fiduciary duty but refused to find the director or JJW Guernsey liable to compensate the liquidators of MBI for the losses arising as a result of the breach.

In considering the appeal brought before them, the Supreme Court upheld the decision of the first instance judge. The Court held that :

1. the director had breached his fiduciary duty to MBI by fraudulently transferring the JJW Inc shares following MBI’s liquidation
2. as a consequence of this breach MBI and its creditors had suffered losses and were therefore entitled to equitable compensation, and
3. that for the purposes of calculating the level of compensation payable, the value of the shares should be fixed at the point of the breach, not at their current value. 

Accordingly, the Supreme Court reinstated the compensation order handed down by the first instance Court and ordered that the director and JJW Guernsey pay the amount of €67,123,403.36 in equitable compensation.