A while ago I wrote about de facto directors and the test for determining who one might be. See here and here.
As a quick reminder, de jure directors are those who have been officially appointed, whereas de facto directors are those who have either: (1) been appointed with defect (Canadian Land Reclaiming and Colonizing Co, Re (1880) LR 14 Ch D 660); (2) have since retired but continued to serve (New Par Consols Ltd, Re [1898] 1 QB 573); (3) or have not been appointed at all (Lo-Line Electric Motors Ltd, Re [1988] Ch 477). A further extension of these categories of de facto directors was recently rejected by the Supreme Court in Holland [2010] UKSC 51. The rejected the notion that a natural director of a corporate director of a composite company could be a de facto director of the latter.
As I highlighted previously, the Supreme Court decision was not determining whether Holland was a de facto director based on his status and functions but deciding on whether the categories of de facto directors could be extended to such an instance.
P Watts in his case comment in the (2011) 127 Law Quarterly Review 162 makes this mistake as to what the case was saying and tries to argue that a fact based test of who a director is, is flawed. He states one must look to whether one has assumed the status and functions of a director. It was respectively submitted that these two are actually one in the same. Arden LJ, in Mumtaz, Re [2011] EWCA Civ 610 confirms this belief when she called Holland an 'incidental issue' and confirmed the case of Gemma Ltd, Re [2008] BCC 812 which used a fact based test in determining whether somebody was a de facto director.
This month the decision in Corin Ltd, Re has confirmed this approach of determining whether someone is a de facto director. The case analysis available on Westlaw noted that there was no one decisive test and all relevant circumstances had to be taken in to account, including whether someone had become part of the corporate governing structure and assumed a role which imposed fiduciary obligations on someone.
This latter point is interesting as it begs the question of whether the courts need to look closer as to whether a fiduciary relationship has been established before imposing director liability.
Confirming that assuming the status and functions and a fact based test are effectively synonyms, is where the court established that the important question was whether someone had assumed the status and functions of a company director so as to make himself liable under the Companies Act as if he were a de jure director.
As a quick reminder, de jure directors are those who have been officially appointed, whereas de facto directors are those who have either: (1) been appointed with defect (Canadian Land Reclaiming and Colonizing Co, Re (1880) LR 14 Ch D 660); (2) have since retired but continued to serve (New Par Consols Ltd, Re [1898] 1 QB 573); (3) or have not been appointed at all (Lo-Line Electric Motors Ltd, Re [1988] Ch 477). A further extension of these categories of de facto directors was recently rejected by the Supreme Court in Holland [2010] UKSC 51. The rejected the notion that a natural director of a corporate director of a composite company could be a de facto director of the latter.
As I highlighted previously, the Supreme Court decision was not determining whether Holland was a de facto director based on his status and functions but deciding on whether the categories of de facto directors could be extended to such an instance.
P Watts in his case comment in the (2011) 127 Law Quarterly Review 162 makes this mistake as to what the case was saying and tries to argue that a fact based test of who a director is, is flawed. He states one must look to whether one has assumed the status and functions of a director. It was respectively submitted that these two are actually one in the same. Arden LJ, in Mumtaz, Re [2011] EWCA Civ 610 confirms this belief when she called Holland an 'incidental issue' and confirmed the case of Gemma Ltd, Re [2008] BCC 812 which used a fact based test in determining whether somebody was a de facto director.
This month the decision in Corin Ltd, Re has confirmed this approach of determining whether someone is a de facto director. The case analysis available on Westlaw noted that there was no one decisive test and all relevant circumstances had to be taken in to account, including whether someone had become part of the corporate governing structure and assumed a role which imposed fiduciary obligations on someone.
This latter point is interesting as it begs the question of whether the courts need to look closer as to whether a fiduciary relationship has been established before imposing director liability.
Confirming that assuming the status and functions and a fact based test are effectively synonyms, is where the court established that the important question was whether someone had assumed the status and functions of a company director so as to make himself liable under the Companies Act as if he were a de jure director.
No comments:
Post a Comment