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Director's inactivity can be a breach of their duties to their company

A dominant managing director had taken nearly £60m from his company, misapplying three of the company's bank accounts, creating fictitious director's loans and false bank facility letters. His fellow directors included two of his siblings, who knew he had previous convictions for dishonesty.

The court said that, by failing to ask questions of the managing director regarding his actions, the two directors were themselves in breach of their duties to their company. Directors must keep themselves informed about what is going on in the business, and participate in its management, which means they should not sit by and let other directors act without being prepared to challenge them, not matter how dominant they are.

Case ref: Lexi Holdings Plc (in administration) v Luqman and Others [2009] EWCA Civ 117

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