I am having early thoughts about research in to this topic. The more I read on the separate legal personality of companies the more I seem to find instances of it being ignored or found depending on whether it suits the court or not.
Take the instance of Chandler v Cape plc [2012] EWCA Civ 525, for which I summarise as I have blogged about in more detail here. The individual was attempting to claim against his company's parent company for harm suffered from asbestos poisoning claiming the parent company owed a duty of care to its subsidiary employees. Here the court actively recognised both company's separate legal personality to find that the parent company was capable of owing a duty of care based on the criteria for owing such a duty. It was not ignoring the separate legal personality of the subsidiary though.
Now take the number of instances involving corporate directors i.e. a company as a separate legal entity serving as a director. On numerous occasions the court has found that individuals who control corporate directors cannot be shadow directors "without more". See Revenue and Customs Commissioners v Holland [2009] EWCA Civ 625 for an overview and example of this. Thus, they leave the door open to certain circumstances where an individual controlling a corporate director may be a shadow director. Generally speaking the court finds they are not. They often find that merely attending the meetings and voting will not open up the individual to personal liability where those decisions can be attributed to the corporate director, and it is not "without more" enough to constitute them as a shadow director, nor a de facto director.
However, in most these cases there has been individuals controlling a sole corporate director. It is difficult to perceive how an individual who makes all the decisions of the corporate director can do more so as to be classed a shadow director.
Ultimately the court is saying that an individual and the corporate director are separate and that all the decisions whilst made by the individual, are attributed to the corporate director as a separate legal entity. The difficulty is that it seems inconsistent with Chandler. The court is ignoring in this instances the ability of an individual to tell the corporate director as a separate legal personality what to do; whereas they acknowledged in Chandler the ability of the parent company to owe a duty of care. The courts would undoubtedly find such a circumstance to be a shadow directorship if the corporate director was a natural person instead. It seems absurd that the only reason they are not a shadow director is because they did not have communicate to anyone what they wanted the corporate director to do.
Ultimately section 155 of the Companies Act 2006 may remedy this anomaly, which I have blogged about here. Since this requires every company to have one natural person, where an outside individual controls a corporate director to avoid liability, they will undoubtedly have to control the individual in question as well and thus it is much more likely to be classed as a shadow directorship.
More cases will need to be examined to fully address these concerns.
On another note, blog post may be slightly less frequent over the next few months as I am in the writing up phase of my PhD.
Take the instance of Chandler v Cape plc [2012] EWCA Civ 525, for which I summarise as I have blogged about in more detail here. The individual was attempting to claim against his company's parent company for harm suffered from asbestos poisoning claiming the parent company owed a duty of care to its subsidiary employees. Here the court actively recognised both company's separate legal personality to find that the parent company was capable of owing a duty of care based on the criteria for owing such a duty. It was not ignoring the separate legal personality of the subsidiary though.
Now take the number of instances involving corporate directors i.e. a company as a separate legal entity serving as a director. On numerous occasions the court has found that individuals who control corporate directors cannot be shadow directors "without more". See Revenue and Customs Commissioners v Holland [2009] EWCA Civ 625 for an overview and example of this. Thus, they leave the door open to certain circumstances where an individual controlling a corporate director may be a shadow director. Generally speaking the court finds they are not. They often find that merely attending the meetings and voting will not open up the individual to personal liability where those decisions can be attributed to the corporate director, and it is not "without more" enough to constitute them as a shadow director, nor a de facto director.
However, in most these cases there has been individuals controlling a sole corporate director. It is difficult to perceive how an individual who makes all the decisions of the corporate director can do more so as to be classed a shadow director.
Ultimately the court is saying that an individual and the corporate director are separate and that all the decisions whilst made by the individual, are attributed to the corporate director as a separate legal entity. The difficulty is that it seems inconsistent with Chandler. The court is ignoring in this instances the ability of an individual to tell the corporate director as a separate legal personality what to do; whereas they acknowledged in Chandler the ability of the parent company to owe a duty of care. The courts would undoubtedly find such a circumstance to be a shadow directorship if the corporate director was a natural person instead. It seems absurd that the only reason they are not a shadow director is because they did not have communicate to anyone what they wanted the corporate director to do.
Ultimately section 155 of the Companies Act 2006 may remedy this anomaly, which I have blogged about here. Since this requires every company to have one natural person, where an outside individual controls a corporate director to avoid liability, they will undoubtedly have to control the individual in question as well and thus it is much more likely to be classed as a shadow directorship.
More cases will need to be examined to fully address these concerns.
On another note, blog post may be slightly less frequent over the next few months as I am in the writing up phase of my PhD.
