The High Court held two of the former directors of the collapsed British Home Stores group of companies (BHS) personally liable to pay at least £18m to the joint liquidators, with additional amounts yet to be determined.

The awards will exceed the amount of insurance available to the directors and were made regardless of their ability to pay.

The case is fact specific, and there are relatively few companies of the size and complexity of BHS. However, small companies can encounter financial difficulties too, sometimes due to unexpected events, and the case is a forceful reminder that directors must understand their duties and responsibilities and can be personally liable if they fail to meet them.

In this case, the directors were found liable for wrongful trading under section 214 of the Insolvency Act 1986 and for what the court termed “misfeasance” claims under section 212 of the Act. This creates a liability for directors who breach their fiduciary or other duties to the company (eg, duties under s172 of the Companies Act 2006).

The judge held that the directors had failed to exercise their independent judgement, failed to exercise reasonable care, skill and diligence in relation to various transactions, and failed to meet their duty to have regard to the interests of the creditors once the company was nearing insolvency.

The directors had obtained extensive accounting/financial and legal advice, but this did not absolve them from responsibility.

The judgement is more than 500 pages long and contains detailed commentary on various aspects of the law and potential liability of directors, but for most directors, the key messages are:

- understand and meet your responsibilities as directors;

- accurate, contemporaneous record-keeping is essential; and

- if your company is in financial difficulty, seek advice early on.