Former directors and corporate opportunities: High Court draws the line between company property and personal know-how
A former director may be liable for exploiting a company opportunity after leaving office, even if the relevant acts all occur post-resignation. However, the opportunity must be one the director became aware of while acting as a director. In Hipgnosis Music Ltd (In Liquidation) v Mercuriadis [2026] EWHC 1500 (Ch), the High Court confirmed that a former director could be liable for breach of the section 175 Companies Act 2006 duty (to avoid conflicts of interest as extended by 170(2)(a) concerning the exploitation of any property, information or opportunity a director became aware of while a director) after their resignation, even if they were not in breach while still in office. However, the court held that an industry insight or idea, even if later developed into a successful business, is not a protected corporate opportunity if the director was aware of it before becoming a director. The claims, which sought an account of profits said to be worth hundreds of millions of dollars, were dismissed.
Factual background
Between 2016 and early 2018, Merck Mercuriadis was a director of two companies, Hipgnosis Music Limited (“HML”) and its subsidiary Hipgnosis Copyrights Plc (“Copyrights”), which pursued a venture involving the acquisition of music publishing catalogues. He subsequently discovered, before any copyrights were acquired, that the seed capital for the venture originated from fraud. As a result, the venture did not come to fruition: no catalogues were bought and a planned bond issue stalled. Following this, HML was wound up in February 2018 and Copyrights was dissolved in May 2018. The same basic music publishing catalogues idea was then pursued by Mr Mercuriadis through new corporate vehicles. In June 2018, a further fund vehicle, Hipgnosis Songs Fund Limited, was set up and successfully raised more than £200 million in an IPO the following month. It went on to acquire a substantial portfolio of catalogues, and Mr Mercuriadis benefited substantially, mainly through the provision of advisory services via his advisory company, Hipgnosis Song Management Limited.
Copyrights was later restored to the register in October 2022 and assigned its claims to HML, which sued through its liquidators. HML alleged that Mr Mercuriadis had diverted a corporate opportunity in breach of his statutory duties and that Hipgnosis Songs Fund Limited and Hipgnosis Song Management Limited had dishonestly assisted those breaches. The Claimants sought an account of profits from Mr Mercuriadis and the two corporate vehicles.
The issues before the High Court
The judgment focused on four main questions:
- Can a former director be liable under sections 170(2)(a) and 175 of the Companies Act 2006 for exploiting an opportunity after ceasing to be a director, and must liability be anchored in something he did wrong while still in office?
- What counts as a protected “maturing business opportunity”, as opposed to a general idea, insight or concept, and did the music catalogues idea qualify?
- Should Mr Mercuriadis, by virtue of the deeming provision in section 1032(1) of the Companies Act 2006 (that a restored company is deemed to have continued in existence throughout the period of its dissolution), be treated as having remained a director of Copyrights throughout its dissolution, owing the full range of statutory duties during that period?
- Were the new corporate vehicles liable as accessories for dishonest assistance?
Liability can arise from post-resignation conduct alone
Under section 170(2)(a), a person who ceases to be a director continues to be subject to the section 175 duty, to avoid conflicts of interest, as regards the exploitation of any property, information or opportunity of which they became aware while a director. The court accepted, in line with Burnell v Trans-TagLtd [2021] EWHC 1457 (Ch) and the Supreme Court’s decision in Recovery Partners GP Ltd and anor v Rukhadze and others [2025] UKSC 10, that liability can be founded solely on acts taking place after resignation. There is no need to trace liability back to some earlier wrongdoing committed while still in office. As Lord Leggatt put it in Recovery Partners, whether the director made plans or took preparatory steps before leaving is “of peripheral significance” – the essence of the wrong is “exploiting the information or opportunity by getting the contract for himself.” On this point, the claimant was right in principle.
A pre-existing idea is not an opportunity under s. 170(2)(a)
The claim nonetheless failed on a point the court treated as fatal. Section 170(2)(a) protects only property, information or an opportunity of which the director became aware while a director. Here, Mr Mercuriadis knew of the basic idea – that music publishing catalogues were undervalued and likely to rise in value – before either HML or Copyrights existed and consequently before Mr Mercuriadis was a director of either of them. In fact, HML and Copyrights were incorporated in order to exploit that idea.
The court drew a careful distinction between the underlying basic idea and the means of exploiting it. The claimant argued that the idea “matured” as an opportunity once the full business proposition was in place, including the use of specialist consultants, a royalty collection agent and active rights management. The court rejected that as artificial: it confused the alleged opportunity with the mechanics of putting it to use. At its heart, the idea was “nothing more than a general idea or even feeling” that, at a point in time in the mid-2010s, a certain asset class was undervalued – “not so much an opportunity as an insight or a concept”. Even if another individual had a similar idea at around the same time, that supported the conclusion that it was generally available to music industry participants.
Measured against the features identified by Lord Leggatt in Recovery Partners, none was present: the idea did not come to Mr Mercuriadis by reason of his role; the knowledge used to exploit it was either acquired before he became a director or was generally available and of no special character; and the idea was not procured through the companies’ efforts or assets. A director, like an employee, builds up a general fund of knowledge and expertise that they remain free to use in a new venture, following the long-standing approach in Island Export Finance Ltd v Umunna [1986] BCLC 460. The court noted that a “foundational idea” pre-dating incorporation may still be protected by other means, including intellectual property rights where available and contractual restrictions, but not by the corporate opportunity rule itself.
In the counterfactual, where the idea to acquire music publishing catalogues had been a maturing business opportunity of HML or Copyrights’ while Mr Mercuriadis was a director, then he would have owed a duty of loyalty to exploit the opportunity only for the benefit of the company, whether or not the company could take up the opportunity for itself. In that scenario, the court confirmed obiter that Mr Mercuriadis would have been liable to account for all the forms of income received, save for salary.
Restoration may preserve the premise of a continuing duty
In considering whether there may be a continuing duty for directors of Copyrights despite its dissolution, the court had regard to the deeming provision in section 1032(1) which provides that the “general effect of an order by the court for restoration to the register is that the company is deemed to have continued in existence as if it had not been dissolved or struck off the register”. This did not apply to HML which had been wound up. In light of that, the court held that Copyrights’ dissolution did not, in itself, prevent reliance on section 170(2)(a). As Copyrights had later been restored, it was deemed to have continued in existence, and that was enough, in principle, to engage the continuing duty in respect of Mr Mercuriadis’ later activities. Restoration did not deem him to have remained in office throughout the period of dissolution. The continuing duty was limited to the company’s continued existence; it did not, without more, recreate the full director-company relationship.
No breach, so no accessory liability
On the basis that the court found no breach of duty by Mr Mercuriadis, and also found that he had not acted dishonestly, the dishonest assistance claims against Hipgnosis Songs Fund Limited and Hipgnosis Song Management Limited failed. The claim against Hipgnosis Songs Fund Limited faced a further attribution difficulty: the company was listed, with an independent board, and Mr Mercuriadis’ knowledge could not be attributed to it. On the counterfactual assumption that liability had arisen, the court indicated that it would not have ordered an account against the listed company (applying Novoship (UK) Ltd v Mikhalyuk and others [2014] EWCA Civ 908) on two grounds. First, there was no sufficient causal link between the relevant acts of dishonest assistance and the claimed profits; and second, any such account would have been disproportionate because the relevant profits depended on third-party investors’ capital, board investment decisions and market movements, and were not profits that Copyrights itself could have ever earned. The court would, however, have been more sympathetic to an account against Hipgnosis Song Management Limited, the advisory company, whose profits would have been more closely connected with the alleged breach.
Comment
For boards and senior executives, the decision is a useful map of the boundaries of the continuing duty. There is no safe harbour merely because the relevant acts occur after resignation: a former director can still be liable for exploiting a protected company opportunity through purely post-resignation conduct. But that is only true where the director became aware of the opportunity while in office.
Equally, the decision confirms a real and practical limit. Pre-known ideas, general know-how, a director’s ‘fund of expertise’, industry insight and personal contacts remain a director’s own to use unless separately protected (for example, by contract). The court’s distinction between the underlying idea and the mechanics of exploiting it is the practical heart of the judgment: dressing up a general insight with a detailed business plan does not convert it into protected corporate property. The decision is therefore welcome confirmation that the corporate opportunity rule does not operate as a back-door restraint of trade.
Practical takeaways
- Treat genuinely valuable opportunities, ideas and relationships as company assets where that is intended, and document that position clearly.
- Do not rely on the corporate opportunity rule alone to protect a foundational idea, particularly in start-ups where the idea may pre-date incorporation. Consider shareholders’ agreements, service agreements, confidentiality provisions, restrictive covenants and intellectual property rights where available.
- On a director’s exit, record what is, and is not, company property, and consider whether any relevant conflict needs to be authorised under section 175 Companies Act 2006.
- Do not assume dissolution is always a clean break. If a dissolved company is later restored, section 170(2)(a) may still matter for opportunities exploited in the interim, although restoration does not itself deem a former director to have remained in office.
For further information, please email the authors or your usual CMS contact.
This article was co-authored by Alice Robson, Trainee Solicitor at CMS.
