Consumers – the unwitting victims of corporate abuse: holding rogue directors to account in the closely-held company

Every year in the UK, thousands of consumers are exploited by rogue traders who operate in the home repair and improvement (HRI) market. Many consumers lack even rudimentary levels of knowledge about the work or costs involved in HRI projects, and are often susceptible to being persuaded by high pressured selling techniques. Rogue trading causes significant consumer detriment, not just in financial terms, and also negatively affects legitimate businesses operating in this market. This thesis suggests that consumers are in particular vulnerable to exploitation by individual rogue traders who incorporate their business, in the form of small private limited companies, referred to as `closely-held companies’. This is because the misfeasant director is also the company’s controlling shareholder. Automatically on incorporation, the two cornerstones of UK company law – limited liability and separate corporate personality – shield rogue directors from being held accountable for their bad faith conduct towards consumers and limit their liability, qua shareholder, in the event of corporate failure. This enables rogue traders intent on consumer exploitation to do so without fear of their personal wealth being at risk if the consumer seeks redress. Many consumers believe that limited liability conveys respectability and longevity; this ignorance of the law increases consumers’ vulnerability and their need for protection from exploitation by closely-held HRI companies. Although consumer law offers vital protection in many respects, it cannot overcome the difficulties created by the doctrine of privity of contract. As a consequence, UK company law has placed consumers in a more vulnerable position, yet offers them no commensurate legislative response against those responsible for causing their losses. This thesis therefore aims to expose any deficiencies in the law in order to identify the potential for law reform, with a view to closing this lacuna created by company law.