ML Covered - September 2026

We are pleased to share our latest instalment of ML Covered, our monthly round-up of key events relevant to those dealing with Management Liability Policies covering D&O, EPL and PTL-type risks.

Court of Appeal revisits the duty that directors owe to prevent a company while trading at a loss

In Next Generation Holdings Ltd, Ambon Brokers Limited (Formerly AFL Insurance Brokers Limited) v Finch [2026], the Court of Appeal found that misappropriation of client money by directors did not cause a company's wider trading losses.

Background

AFL Insurance Brokers Limited (AFL) was an FCA-registered insurance broker, and was required to comply with Chapter 5 of the FCA’s Client Assets Sourcebook, to hold client money on trust in segregated client accounts and to perform periodic client money calculations. Alec Finch and Bob Finch (the Defendants) were directors of AFL. Between August 2011 and September 2017, they improperly caused AFL to draw money from the client money accounts to meet AFL’s liabilities, business expenses and trading losses, and caused false accounting entries to be made in the company’s accounting records to cover this up, and present a misleading picture of profitability and solvency.

In September 2017, Alec Finch sold 58% of AFL to Next Generation Holdings Limited (NGHL), induced by fraudulent misrepresentations including a spreadsheet based on the false accounting records. By this time, the client money deficit had grown to £3.51 million. NGHL made substantial capital injections into the company before the misappropriations from the client accounts came to light in 2020. The business entered a solvent wind-down.

AFL brought a claim against the Defendants for breaches of their duties under section 172(1) of the Companies Act 2006 and for unlawful means conspiracy, on the basis that AFL, without the breaches of fiduciary duty and/or conspiracy, would have ceased trading and would not have incurred further losses or capital injections. The claim succeeded in the High Court, but the Defendants appealed on the basis that the High Court had erred in holding that AFL’s trading losses were caused by the Defendants' fraud.

Decision

The Court of Appeal allowed the appeal. The Court held that there was no suggestion that the Defendants had breached their duties in relation to the commercial aspects of AFL’s insurance broking business that operated at a loss or had misappropriated assets of AFL over which they had control as fiduciaries. Instead, the breach of fiduciary duty was causing AFL to take money belonging to AFL’s clients, to pay trading expenses and liabilities. The Court held that "directors do not, without more, owe fiduciary duties not to cause their company to trade at a loss" nor do they "owe fiduciary duties not to cause or allow their company to trade whilst insolvent."

The Court decided that AFL’s trading losses did not flow directly from the Defendants' breaches of duty. The Defendants were therefore liable for direct losses caused to AFL, being the £3.5 million taken from the client money accounts, plus investigation costs, being a reduction of £598,994 in damages awarded to AFL.

Key Takeaways

The Court ruled that causing a company to trade whilst loss-making or insolvent is not in itself a breach of a director’s section 172(1) duty to act in the company’s best interests, which simply reaffirms previous case law. With high numbers of corporate insolvencies, the role of directors when a company is in financial difficulties remains a topical issue that needs to be managed carefully.

To read the full decision, please click here.

Insolvency Service publishes its 2025/26 enforcement actions against directors and its insolvency statistics

The Insolvency Service has published its enforcement outcomes for 2025-26, detailing the enforcement actions taken against directors.

Director disqualifications and bankruptcy restrictions

During the period, there were 1,158 director disqualifications resulting from enforcement activity under sections 2, 6 and 8 of the Company Directors Disqualifications Act (CDDA) 1986, with the mean length of disqualifications being 8.1 years. The number of disqualifications is higher than 2024/25, where 1,037 directors were disqualified.

There were 1,044 director disqualifications under section 6 of the CDDA during 2025-26. Section 6 relates to unfit conduct in relation to an insolvent or dissolved company. This is an increase on the previous year's figure of 967. Similar to the previous year, the majority of these disqualifications related to allegations of Covid-19 financial support scheme abuse, with a mean disqualification of 9.4 years. Of the 1,044 disqualifications only 3 related to dissolved companies. The Insolvency Service has had the power to investigate directors of dissolved companies as well as insolvent companies since 2021.

The Insolvency Service imposed 93 bankruptcy and debt relief restrictions during the period, a decrease on the 131 imposed over the same period in the previous year. As with the section 6 director disqualifications, the majority of the restrictions relate to allegations of abuse of the Covid-19 financial support scheme.

During the period, the Insolvency Service also convicted 81 individuals, of which almost half related to Covid-19 financial support scheme abuse. In terms of civil investigations, the Insolvency Service obtained 125 civil compensation orders and undertakings, totalling £4,548,018.

Key Takeaways

The number of enforcement actions taken by the Insolvency Service remain high, with an increase over the previous year. Many of these continue to be a legacy of abuses of the Covid financial support scheme. With the number of corporate insolvencies reaching a 30 year high in 2023 and remaining high across 2024 and 2025, it can be expected that the Insolvency Service will be investigating the conduct of a larger number of directors, potentially resulting in larger number of disqualifications, particularly under section 6 of the CDDA.

To read more about the Insolvency Service's enforcement actions, please click here.

Court grants pre-action disclosure regarding allegations of fraudulent misrepresentation and unlawful means conspiracy

In El Debs and others v Coughlan [2026] EWHC 2160 (Ch), the High Court granted pre-action disclosure to investors alleging fraudulent misrepresentation and unlawful means conspiracy, having rejected that such allegations were speculative.

Background

The applicants were members of a family business who invested about $6m in Drecford Holdings Limited (Drecford), a company in the Abu Dhabi Global Market (ADGM). The initial investment was done by subscribing to loan notes, which were later converted into bonds. Craig Coughlan (the Respondent) was a 50% shareholder and director of Drecford.

The investments were arranged by Purple Capital Group SAM (Purple Capital), a Monaco-based adviser whose principals were, unbeknown to the applicants, also shareholders (together holding the other 50%) in Drecford. Drecford was promoted by Purple Capital as a low-risk commodities trading venture. The applicants argued that they relied on these assurances and would not have invested had they known of Purple Capital’s conflict. After the loan notes were converted to bonds, only one interest payment was made. Drecford later reported liquidity issues, ceased communication, and was deregistered in the ADGM in May 2024.

The applicants identified potential claims against the Respondent for fraudulent misrepresentation and unlawful means conspiracy. The applicants applied on 6 January 2026 for pre-action disclosure under the Civil Procedural rules (CPR) r.31.16. The Respondent opposed the application, arguing that the applicants were unlikely to bring proceedings in England, because ADGM was the natural forum; the proposed claims were speculative, and; disclosure was not desirable and should be rejected on discretionary grounds.

Decision

The Court granted pre-action disclosure under CPR r.31.16, with limits. The court rejected the Respondent’s objections that England was not the natural forum, on the basis that the Respondent had not shown that the ADGM was the more appropriate jurisdiction. The Court also held that the proposed deceit and unlawful means conspiracy claims were arguable and not speculative, and that deceit does not require an assumption of responsibility.

Overall, the court considered disclosure to be desirable because the Respondent had provided no account for the loss (and so the material for the applicants to be able to particularise their claim is in "the respondent's hands"), and disclosure may avoid proceedings and/or save costs by enabling the correct defendants to be identified at the outset (rather than by amendment at a later stage).

Key Takeaways

The decision shows that courts will facilitate disclosure against individuals facing allegations of investment fraud, even where only circumstantial evidence is available. Insurers are likely to want to reserve their position in respect of the application of any relevant conduct clauses in circumstances where there has been an application by a Claimant alleging fraudulent misrepresentation.

To read the full decision, please click here.

TPO decide bunched weekly pay does not multiply AE threshold

In a recent case, the Pension Ombudsman (TPO) considered a common operational issue for employers that pay contractors weekly via timesheets: what happens to auto-enrolment pension contributions when several weeks’ timesheets are processed together in one payroll run. The Complainant argued that, where his timesheets were approved late by the end client and multiple weeks were paid in one go, the employer should have applied the weekly qualifying earnings thresholds separately to each week’s pay. That would have increased the slice of pay treated as “qualifying earnings” and, in turn, the pension contributions deducted and paid.

TPO disagreed, holding that earnings are assessed by reference to the pay reference period (here, one week) and the total earnings payable in that period, even if those payments relate to work done over multiple earlier weeks. Where payments are “bunched” into a single weekly pay packet, only one set of weekly thresholds applies to the aggregated amount.

Background

Auto-enrolment pension contributions are calculated by reference to “qualifying earnings” within a pay reference period. Under the Occupational and Personal Pension Schemes (Automatic Enrolment) Regulations 2010 (SI 2010/772) (the AE Regulations), where a person’s regular wage or salary is paid by reference to a week, the pay reference period is one week. Contributions may then be expressed as a percentage of qualifying earnings due in the relevant pay reference period.

For the 2022/23 and 2023/24 tax years, the Pensions Regulator’s published weekly thresholds were:

• Lower earnings threshold: £120 per week
• Upper earnings threshold: £967 per week

In broad terms, contributions are payable only on earnings between those limits.

The Complainant started work with Morson Ltd on 26 October 2016, as a contractor providing services to a third-party end client. Following a twelve-week postponement period, he was enrolled into The People’s Pension in January 2017. He was paid weekly, based on submitted timesheets which required countersignature by an authorised end-client representative before payroll would process them.

On 4 August 2023, the Complainant complained that delays in end-client approval meant multiple weekly timesheets were sometimes processed together in one payroll. In his view, applying the weekly thresholds once to a combined payment (rather than applying the thresholds separately to each week) resulted in pension contributions that were lower than he expected. The Complainant identified various reasons for late submission or approval, including problems with the end-client’s timesheet system, unavailability of managers to approve timesheets, connectivity issues at worksites, and issues with booking codes.

The Complainant escalated the complaint to TPO on 14 October 2023. The employer provided its formal response on 22 May 2025, maintaining that its approach reflected the statutory pay reference period rules and that it calculated contributions by reference to the total amounts payable in each weekly period.

Decision

TPO did not uphold the Complainant’s complaint and found no maladministration.

The central point was the operation of the pay reference period under the regulations; because the Complainant was paid his regular wage by reference to a week, his pay reference period was one week. Under the regulations, the employer was required to calculate qualifying earnings by reference to the earnings due in the relevant pay reference period. On that basis, when multiple timesheets were processed in a single weekly payroll, the employer was required to treat the resulting payment as the total payable in that one weekly period and apply one set of weekly thresholds to that combined figure. There was no requirement to apply separate weekly thresholds to each underlying timesheet.

The Complainant also relied on a contractual clause about investigating pay issues where timesheets were not submitted in a timely fashion. The Deputy Pensions Ombudsman considered the evidence and concluded that relevant steps were taken once timesheets were submitted, and that the Complainant had not demonstrated that pension contributions had not been paid as required. The determination also drew a boundary around responsibility: the end client’s system and approval delays were not matters for which the employer was responsible in the context of pension administration, and were in substance more akin to an employment/contractual issue than a pension maladministration issue.

Key Takeaways

This determination reinforces that auto-enrolment qualifying earnings are assessed by reference to the pay reference period, not the period in which the work was performed. Where multiple timesheets are processed together in a single weekly payroll run, employers can apply one set of weekly thresholds to the aggregated payment, and that approach is unlikely to amount to maladministration if it follows the AE Regulations. It also highlights that delays caused by an end client’s timesheet system may be better treated as an employment or contractual issue rather than a pensions administration failing.  It is also a good reminder that all employers can benefit from PTL insurance given the risks to challenge in the operation of auto-enrolment.

To read TPO's decision, please click here.

High Court decides that trustee RPI affordability tests must look beyond the next valuation cycle

On 3 August 2026, the High Court in Northumbrian Water Ltd v Northumbrian Water Pension Trustees Ltd [2026] EWHC 1952 (Ch) considered how a trustee should apply an “affordability” condition embedded in a pension increase rule. The dispute arose because RPI exceeded five per cent in 2021 to 2023, triggering potential “excess” increases above a guaranteed cap for certain members, but only if those extra increases could be paid without requiring higher employer contributions.

The court held the trustee’s test is forward-looking. It is not limited to whether contributions would increase immediately; it must also consider whether granting the increase would drive higher contributions at a future scheduled actuarial valuation. The judgment also provides guidance on the level of certainty required before full increases are awarded, and on how trustees should approach competing claims in a multi-section scheme that has moved away from segregated assets.

Background

The case concerned the Northumbrian Water Pension Scheme, a defined benefit scheme governed by trust deed and rules, with Northumbrian Water Pension Trustees Ltd as trustee. The relevant provisions sat within the “WPS section” and traced back to the 1992 Water Pension Scheme, with indexation rules (rules 4.9 and 4.10) providing, for pre-2008 service, annual increases by a “Guaranteed Amount” of five per cent or the increase in RPI (whichever was lower), plus possible additional increases if RPI rose above five per cent, subject to conditions linked to employer contributions.

The sponsoring employer, Northumbrian Water Limited, sought the court’s directions on the correct interpretation of rule 4.9. Under the statutory funding regime in the Pensions Act 2004, defined benefit schemes are funded through triennial actuarial valuations, schedules of contributions and recovery plans. By December 2022, the scheme’s valuation showed a deficit of £181.5 million (around 81.5% funded). Against that backdrop, the parties disagreed on whether the “no increase in employer contributions” condition should be assessed only by reference to current contribution rates, or whether it also required the trustee to consider increases that might arise at future valuations.

Decision

The court held that limb 1A of rule 4.9 requires a forward-looking assessment of whether employer contributions would increase if full RPI increases were paid, including increases that may arise at a forthcoming scheduled actuarial valuation. The trustee must undertake that assessment; it is not confined to immediate contribution consequences.

Key Takeaways

Where pension increases are conditional on an affordability gateway, trustees may need to take a realistic funding view that looks beyond the current contribution schedule and into the likely outcome of future valuations. The decision suggests a relatively demanding standard of confidence before granting full excess increases, framed as the absence of material uncertainty about contribution impacts. For employers and actuaries, the ruling reduces the risk of benefit outcomes turning on timing quirks between increase dates and valuation cycles. For trustees of desegregated multi-section schemes, it underlines the need to consider competing section-wide claims when assessing available resources.

PDP dashboards guidance interim manual reporting for DCOs from 1 September 2026

The Pensions Dashboards Programme (PDP) has published guidance on interim manual reporting from 1 September 2026 for directly connected organisations (DCOs) that have not yet implemented daily reporting of dashboards reporting data to the Money and Pensions Service (MaPS) via API.

Under the PDP reporting standards version 2.0, connected providers and schemes must record specified data items to be made available on request. In June 2026, the PDP confirmed its intention to move to daily reporting to MaPS, with a mandatory implementation deadline of 1 March 2027. Pending completion of that “uplift”, affected DCOs must submit a subset of the reporting data through a manual file upload process.

Manual reports must be submitted within five working days after each month end and must cover a complete calendar month. By way of example, data for 1 September 2026 to 30 September 2026 must be submitted by the end of 7 October 2026. If a DCO completes daily reporting via API part-way through a month, it must still submit manual data for the full month. The interim manual reporting obligation falls away once MaPS confirms that the DCO has completed implementation of the reporting standards uplift.

To consider the guidance in more detail, please click here.

Consultation open on draft ACAS Code of Practice updates for Disciplinary and Grievance procedures

With the Code of Practice having last been fully revised in 2009, ACAS has now published a draft updated Code of Practice on Disciplinary and Grievance procedures (the Draft) as well as a consultation seeking views on the changes.

Formal disciplinary and grievances processes within the workplace can be costly and time-consuming, particularly in light of the rising number of complaints across the workforce. The revisions proposed by ACAS attempt to address issues with fairness, transparency and avoid the risk of a grievance or disciplinary action escalating unnecessarily. The main proposed changes are summarised below.

• Terminology changes: the Draft proposes changing the words "disciplinary" and "grievance" to "concerns", which is considered less adversarial, as well as changing "employee" to "workers" on the basis that this is more inclusive as employers should be following the code of conduct for both employees and workers in any event.
•  Informal resolutions: the Draft places greater emphasis on resolving concerns informally and at any early stage, with failures by either the employer or worker in trying to engage in early informal processes resulting in compensation adjustments of up to 25% in either side's favour.
• Principles of fairness: this is proposed to be a new section at the beginning of the Draft, promoting early and informal resolution and introducing an expectation that both employers and workers should aim to resolve concerns early without unnecessary escalation.
• Avoiding unlawful discrimination: currently, the Code of Conduct does not refer to Equality Act 2010 (EqA) obligations when dealing with concerns. As such, the Draft proposes explicit reference to the EqA and a reminder on employers to make reasonable adjustments for disabled workers. This may include ensuring venues are physically accessible and providing documents to the worker in an accessible format. Workers are encouraged to discuss adjustments that they need as soon as possible with their employer.
• Training: the Draft encourages the provision of training for managers, workers and representatives in handling conflict early and effectively.
• Suspension during formal disciplinary procedures: the Draft proposes a new section on setting out when suspension may be an appropriate mechanism whilst investigations are carried out, e.g. to protect the investigation, the organisation, other staff or the worker themselves.
• Worker's written grievance requirements: the Draft proposes an explicit recommendation that workers should set out in their grievance (a) their ideal resolution and (b) what steps they have taken to resolve the concern informally.
• Length of written grievance: in light of a "trend" of written grievances becoming lengthy and complex, the Draft now suggests that written grievances should be short and clear.
• Mediation and facilitated conversations: the Draft proposes a new section on encouraging the use of these methods of resolution in appropriate circumstances.

The Draft does not explicitly refer to any changes in respect of AI but, in light of the increasing use of it in disciplinary and grievance procedures (and subsequently in Tribunal litigation itself), the consultation does seek views on any benefits or risks that the ACAS Code of Conduct or other non-statutory guidance should consider.

The Draft emphasises the importance of resolving workplace "concerns" informally and efficiently where possible. The Draft introduces more practical guidance such as with respect to training, the use of suspension and ensuring that written grievances are not unnecessarily complex or lengthy. Views are sought on the proposed changes as well as how issues such as AI should be addressed, with this consultation ending on 23 September 2026.

You can read more here.

Equal Pay reform: UK Consultation targets transparency and enforcement

The UK government has launched a 15-week 82-question consultation on reforming the equal pay and pay discrimination framework. It argues the current system is “excessively complex, costly, and protracted”, with tens of thousands of claims delayed for years. The consultation proposes a phased approach. First, it includes fixing systemic problems in process, transparency and enforcement, then extending protections once the system is working more effectively.

A central proposal is increased pay transparency at recruitment. The government is considering a statutory requirement for employers to publish pay information in job adverts or provide it in writing before interview where no advert exists. The aim is to reduce information asymmetry, support consistent pay-setting, and prevent discriminatory outcomes before they arise.

On enforcement, the consultation proposes strengthening measures for employers found to have committed pay discrimination - reinstating a statutory questionnaire procedure for pay discrimination cases and establishing an Equal Pay Regulatory and Enforcement Unit to drive strategic, proactive compliance. It also signals reviews of tribunal procedures and the independent panel of experts, focusing on delays in equal value claims and material factor defence disputes.

To read the consultation please click here.

FWA publishes its first delivery plan for 2026 to 2027

The Fair Work Agency (FWA) has published its first delivery plan for 2026 to 2027, setting out its priorities, activities, and performance measures for its first year in operation.

The FWA's purpose is to:

• Ensure workers impacted by labour exploitation understand and access their rights and support;
• Make compliance simpler, supporting businesses to understand and act on their obligations; and
• Act against employers who exploit workers and/or undercut legitimate business.

The FWA's first year plan centres around three independent goals: Deliver, Build and Innovate.

Deliver for those who need the FWA

The FWA will maintain strong frontline operational performance while delivering the benefits of a joined-up, intelligence-led enforcement body across the UK. It aims to meet agreed performance metrics (including National Minimum Wage enforcement delivered under contract), integrate stakeholder relationships and build partnerships with devolved governments, Combined Authorities and wider enforcement bodies; this will be supported by a FWA Assembly in October 2026.

Improvements in customer experience as a result of clearer guidance on its roles, better communications (including websites and social media etc.) and working with ACAS to improve signposting and referrals. Lastly, it will maximise day-one powers (e.g. Fraud Act Powers) and develop an integrated approach for legal and prosecution services for April 2027 and beyond.

Build the organisation

The FWA will create the foundations for an enforcement body that is fit for scale and future expansion, for example, integrating National Minimum Wage colleagues at HMRC into the FWA. It intends to develop a new estates and locations plan to support recruitment, retention, and delivery. Further, the FWA will develop and publish its 2027/28 Business Plan and a 2027–2030 Enforcement Strategy for April 2027.

Innovate the FWA's approaches

The FWA will develop clearer, more user-friendly digital tools and guidance (such as, online payslip explainer and a holiday pay calculator) and streamline internal processes which will improve consistency and reduce cycle times. The FWA will work with partners to develop open-source data scraping and design a unified case management system with integrated AI to manage case flow. The FWA's Chair and Advisory Board will emphasise thought leadership, better decision-making and policy development and demonstrate how wider engagement activity support and share insight across sectors.

The FWA has a wide range of powers including inspecting workplaces and requiring employers to produce evidence of compliance with employment law as well as applying penalties where necessary.

To read more please click here.

Part-time worker claims just got easier following Supreme Court decision

The Supreme Court has clarified that part-time workers do not need to demonstrate that part-time status was the only reason for less favourable treatment under the Part-time Workers Regulations.  The change will mean that employees will have an easier test to comply with in order to succeed with a claim. 

Background

Mr Augustine, a part-time private hire driver, had to pay a fixed weekly fee (£148) to access his employer’s booking system — the same fee as full-time drivers.

He argued the flat fee was less favourable treatment because it represented a greater burden for part-time drivers (as a proportion of time worked/earnings).

The lower courts had consistently applied the previous interpretation of the law which required that part-time workers were required to show that the less favourable treatment was solely because they were part time. 

The Supreme Court held that a part-time worker does not need to show their part-time status was the only reason for the treatment.  Instead, it’s sufficient that part-time status was an effective cause of the disadvantage.

Practical takeaways

The key takeaways from the decision are that employers will no longer be able to rely on a universal policy as a defence to a claim for part-time worker discrimination.   This will be particularly relevant to:

• fixed charges (fees, deductions, contributions)
•  allowances and benefits not applied pro rata
• bonuses and eligibility thresholds

A cost that is minor for full-time staff may be materially more onerous for part-time staff.

Employers will still be able to defend a claim if they can demonstrate that potential discrimination is a proportionate means of achieving a legitimate aim, which will be more burdensome.

Next steps

Employers should look to identify any flat-rate costs/benefits in your workforce model (including contractor-style arrangements) and assess whether they present a greater impact part-time staff.

To read the judgment in full, please click here.

Court of Appeal restores finding of Unfair Dismissal despite good internal appeal process

In Argence-Lafon v Ark Syndicate Management Ltd [2026] EWCA Civ 1039, the Court of Appeal ("CoA") reinstated an Employment Tribunal ("ET") finding of ordinary unfair dismissal, holding that the Employment Appeal Tribunal ("EAT") had been wrong to remit the claim for rehearing.

Mr Argence-Lafon was a senior underwriter who transferred to the respondent under TUPE and raised concerns about what he believed to be a fraudulent insurance claim. He later brought claims for whistleblowing detriment and unfair dismissal.

The ET rejected the whistleblowing claim but upheld his unfair dismissal complaint, identifying procedural failings in the employer’s handling of the dismissal. On the employer’s cross‑appeal, the EAT concluded that the ET had erred by not properly considering whether the internal appeal process could rectify those defects, and it remitted the unfair dismissal claim.

Allowing Mr Argence-Lafon’s appeal, the CoA held that the ET had, in fact, considered the appeal stage when assessing overall fairness and was entitled to conclude that the defects were not cured. The statutory fairness assessment requires the process to be evaluated as a whole, and the ET’s conclusion was open to it on the evidence.

The case is a helpful reminder of the importance of robust disciplinary procedures being followed at every stage of the investigation.

Click here to read the Judgment.