Privy Council Confirms Directors Have No Standing To Bring Claims In The Name Of A Company In Liquidation

The ability to bring a claim in the name of a company in liquidation is reserved to those with an entitlement to share in the distribution of the assets of the company.

The Board of the Privy Council has refused permission for a director of a Mauritian company in liquidation to continue a claim on behalf of the company, instead of the liquidators: Manhattan Coffee Investment Holding (in liquidation) v Mwagiru [2026] UKPC 21.  

The Board confirmed that the court can authorise someone other than a liquidator to pursue a claim in the name of a company. However, it held that permission can only be given to those with a genuine economic interest in the liquidation – namely creditors and (where a surplus is likely) contributories. The fact that a director may be entitled to apply to court for general directions under the insolvency statute is irrelevant and does not afford them a right to bring or continue an action in the company's name.

The decision also addresses three procedural questions of broader relevance. 

• Once a company goes into liquidation, the statutory derivative claim regime – which ordinarily allows shareholders and (in Mauritius) directors to bring proceedings in the company's name – ceases to apply. The liquidator steps into the company's shoes, and the court's supervisory jurisdiction (rather than the statutory derivative regime) governs any question of who else may have conduct of the company's claims.
• It is not necessary to apply to lift the statutory insolvency moratorium before seeking leave to conduct a company's claim, or before seeking directions for the liquidation, as these are not actions against the company. 
• Ex parte orders should only be made in exceptional circumstances, where notice would frustrate their purpose or where urgency makes notice impossible. 

Background

Manhattan Coffee Investment Holding (the “Company”) is a company incorporated in Mauritius. At the relevant time, the Company’s only assets were shares in two other Mauritian companies which indirectly hold investments in Kenya (the “Cedar Companies”). One of the Company's directors was the appellant: Mr Stephen Mwagiru. 

In June 2015, another shareholder of the Cedar Companies, SCF Holdings II Ltd (“SCF”) commenced arbitration proceedings against the Company in London. The proceedings resulted in a partial final award which included findings that Mr Mwagiru had made false representations on behalf of the Company knowing them to be false or without any belief in their truth. The Company was ordered to pay SCF nearly US$15m, plus interest. 

The Company did not satisfy the award. In 2019, SCF presented a winding up petition against the Company in Mauritius. The Company's attempts (under Mr Mwagiru's direction) to appeal the decision were rejected, and a compulsory winding up order was made in 2023, followed by the appointment of joint liquidators. 

In March 2017, during the course of the 2015 arbitration and prior to the winding up order, the Company started Mauritian proceedings against the Cedar Companies and SCF disputing share issues in the Cedar Companies which it alleged had unlawfully diluted its shareholdings (the “Plaint”). 

Following their appointment, the joint liquidators did not pursue the Plaint and advertised the Company's shareholdings for sale. 

In November 2023, Mr Mwagiru made two applications to the Mauritian courts targeted at allowing him to take conduct of the Plaint on behalf of the Company:

• An application under s.154(1)(c) of the Mauritian Insolvency Act 2009 ("IA 2009"), which imposes a moratorium on proceedings against a company or its property on the commencement of liquidation, unless the liquidator agrees or the court orders otherwise. Mr Mwagiru sought leave under that provision to apply for permission to continue the Plaint as a derivative action under s.170 of the Mauritian Companies Act 2001, and to obtain an interim injunction restraining the joint liquidators from disposing of the Company's assets pending determination of the Plaint.
• Subsequently, an application under s.170(1)(b) (the statute governing Mauritian derivative claims procedure) and s.174 of the IA 2009 (which allows the court to give directions in relation to any matter arising in connection with a liquidation). Mr Mwagiru sought an order under those provisions authorising him as director to continue the Plaint in the name and on behalf of the Company.

Both applications were granted without notice to the Company, without a hearing and without any reasons given. 

The Company, acting by the joint liquidators, successfully appealed both orders before the Court of Civil Appeal of Mauritius. Mr Mwagiru then appealed to the Privy Council.

Decision

The Board (Lord Richards giving the judgment) dismissed both appeals, commenting that orders secured ex parte in Mauritius were entirely misconceived and had led to considerable and unnecessary procedural confusion. 

The derivative claim regime does not apply to companies in liquidation

The Board confirmed that s.170 – the derivative claim regime in the Mauritian companies legislation– has no application to a company in liquidation. Two features of the section make this clear:

• First, only a shareholder or (in Mauritius) a director may apply to bring a derivative claim but, once a company is in insolvent liquidation, it is the creditors who have the primary interest in the company's assets. If the statutory right was intended to apply in a liquidation, it is inconceivable that the statute would not make provision for a creditor to apply. This reasoning can be read across to the position under English law. 
• Second, s.170(3) requires the court to be satisfied that either the company does not intend to bring or diligently prosecute the proceedings, or it is in the interests of the company that conduct of the proceedings should not be left to the directors or to shareholders as a whole. That language makes no sense once conduct of the company’s affairs is vested in a liquidator. Had s.170(3) been intended to apply to a company in liquidation, reference to a liquidator would have been made. 

This conclusion is consistent with authorities in Canada, Australia, New Zealand and Singapore.

Directors do not have standing to bring claims in the company's name

The Board confirmed, contrary to the Mauritian Court of Civil Appeal's view, that the court does have power, where a company is in liquidation, to authorise a person other than a liquidator to bring or continue proceedings in the name of the company. This power arises from the court’s inherent jurisdiction to supervise and give directions as to the conduct of a liquidation, which in Mauritius is also expressly contained in s.174. 

However, authorities show that the basis for that power is to enable those who have an interest in the collection, realisation and distribution of the company's assets to pursue claims for the benefit of the estate. Ordinarily, only creditors and contributories have such an interest.

Those with no economic interest in the distribution – including a director – have no legitimate interest in pursuing the company's claims, at any rate in the absence of exceptional circumstances. The fact that, in Mauritius, directors are permitted under s.174 to apply for directions (contrary to the position under English statute) does not mean that they have standing to apply for any direction – the applicant must still demonstrate a legitimate interest in the directions sought. 

Mr Mwagiru sought to argue that exceptional circumstances did exist in this case, because in Mauritius – unlike under English law – directors do not cease to hold office when a winding up order is made under s.154(1) of the IA 2009 (though they do generally cease to have powers, functions or duties). Mr Mwagiru submitted that he would be acting in the best interests of the Company by continuing the Plaint in circumstances where the liquidators had decided not to do so. The Board disagreed and was satisfied Mr Mwagiru did not hold any residual powers save as expressly provided in statute.

Unnecessary to lift moratorium 

On a separate point, the Board confirmed that the insolvency moratorium is not engaged by an application for leave to bring proceedings on behalf of the company in liquidation, or for directions as to steps to be taken in the liquidation under s.174, since they are not legal proceedings “against the company or in relation to its property”. As such, there is no need to apply for the moratorium to be lifted before seeking leave to bring a derivative claim or applying for directions. 

The ex parte orders were unjustifiable

Lastly, the Board endorsed the Court of Civil Appeal's criticism that the orders should not have been made without notice to the joint liquidators and without giving them any opportunity to be heard. Ex parte orders (ie orders made without notice to the other side) should be made only in exceptional circumstances, such as where giving notice would frustrate the purpose of the order (for example, an application for a freezing injunction), or where genuine urgency makes prior notice impossible. There were no such circumstances here, and the process followed was clearly not appropriate. 

Herbert Smith Freehills Kramer acted for SCF in the London arbitration proceedings.

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