The short answer
Misfeasance is a court remedy used in liquidation to make a director (or other officer) personally account for a breach of duty, the misapplication of company money or property, or the retention of assets that belong to the company. Under section 212 of the Insolvency Act 1986 it is a summary procedure — a faster route for a liquidator to bring an existing wrong before the court — and the order is usually that the director repays or restores the value to the company.
Misfeasance is not a separate crime or a new duty — it is a procedural shortcut. When a company is wound up, a liquidator can use section 212 to drag breaches of an officer’s existing duties straight before the court, rather than starting a full civil action. This guide explains who can be pursued, what conduct counts, and what the court can order.
Misfeasance at a glance
- Governing law Section 212, Insolvency Act 1986
- Nature Summary remedy in a winding up
- Who can be pursued Directors, officers, IPs, promoters
- Conduct Breach of duty or misapplied property
- Who brings it Liquidator, official receiver, creditor
- Outcome Personal repayment or restoration
What misfeasance actually is
Section 212 does not create a fresh obligation. It is a summary remedy — a quicker court process available once a company is in liquidation — that lets the office-holder pursue someone who has misapplied or retained company money or property, or been guilty of a breach of any fiduciary or other duty to the company. The wrong already exists under company law; section 212 simply provides the route to remedy it inside the winding up.
Who can be pursued
- Directors — including shadow and de facto directors.
- Other officers of the company, such as a company secretary.
- Promoters involved in forming the company.
- A liquidator or administrator who has breached their own duties.
Conduct that typically triggers a claim
| Conduct | Example |
|---|---|
| Misapplying company funds | Drawing money for personal use as the company fails |
| Unlawful dividends | Paying dividends with no distributable profits |
| Breach of duty | Acting against the company’s and creditors’ interests once insolvent |
| Retaining assets | Keeping company property after liquidation |
Why a liquidator uses section 212
The attraction of misfeasance is procedural. Rather than commencing a fresh civil claim against a director — with all the cost and delay that involves — the office-holder can bring the existing breach before the court that is already supervising the winding up, using a streamlined application. That makes it a cost-effective way to recover money for creditors, which is why it is so commonly pursued where a director has taken value out of a failing company. It can also run alongside disqualification proceedings, so the same conduct may have two consequences: repayment and a ban.
How it relates to other claims
The same facts that found a misfeasance claim often overlap with a preference, a transaction at undervalue, or wrongful trading. Misfeasance is frequently used because it is quicker and cheaper than a standalone action, and it can be combined with a referral on the director’s conduct to the Insolvency Service. For the wider picture of when a director’s own money is at stake, see director personal liability.
What the court can order
If misfeasance is proven, the court can order the director or officer to repay, restore or account for the money or property, or to contribute a sum to the company’s assets by way of compensation. The recovered funds go to the company for distribution to creditors. It is a personal liability — the protection of limited liability does not shield a director from their own breaches of duty.
Facing a misfeasance allegation as a director?
Only a licensed insolvency practitioner or solicitor can assess a section 212 claim on your facts. A short, confidential call helps you understand your exposure.
Frequently asked questions
Is misfeasance a criminal offence?
No — it is a civil remedy. It can run alongside disqualification proceedings, and serious cases may attract separate criminal or fraud investigations, but section 212 itself is about repayment.
Who can bring a misfeasance claim?
Usually the liquidator or official receiver, but a creditor or contributory can also apply with the court’s permission.
Does limited liability protect me?
Not from your own breaches of duty. Limited liability protects shareholders from company debts, not directors from misapplying company property.
What is the typical outcome?
An order to repay or restore the money or property, or to compensate the company, with the funds shared among creditors.
Sources & further reading
- Insolvency Act 1986 — section 212 (summary remedy against delinquent directors)
- GOV.UK — Running a limited company: directors’ responsibilities
- The Insolvency Service — guidance for company directors
- Company Directors Disqualification Act 1986 — unfit conduct
This guide is general information, not formal insolvency advice. Your situation must be assessed by a licensed insolvency practitioner before you act.