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R Toone and another v W Ross and another

Employee benefit trusts and director’s duties 

In R Toone and another v W Ross and another [2019] EWHC 2855 (30 October 2019) the High Court found that monies paid into employee benefit trusts (EBTs) had amounted to illegal capital distributions.

Implement Consulting had into entered insolvent liquidation on 26 November 2016 and the joint liquidators contended that the monies previously paid by the company into two EBTs were in substance unlawful distributions of capital to the respondents who were directors and shareholders of the company. The Particulars of Claim summarised: ‘These proceedings arise from distributions of the Company’s assets (almost entirely for the direct personal benefit of the respondents) made in breach of trust and/or fiduciary duty and/or that were unlawful and void and/or within the meaning of s 423 of the Insolvency Act 1986.’

The High Court observed that the purpose of the arrangements had been...

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