Successful Appeal before The Supreme Court in Company Law Case

24 November 2010

In one of its rare decisions on company law matters, the Supreme Court has handed down judgment on whether the director of a company which itself was a director of a number of underlying companies was a de facto director of those underlying companies. The corporate director authorised the underlying companies to pay out unlawful dividends to the shareholders of the underlying companies. Mr Holland was the sole active director of the corporate director and its “guiding spirit”.

By a 3-2 majority the Supreme Court held that Mr Holland was not a de facto director of the underlying companies. He had acted at all times within his capacity as director of the corporate director and at no point had he assumed a part in the corporate governance of the underlying companies. The minority considered this reasoning “arid formalism”. The Supreme Court went on to give valuable guidance on the basis of liability and the correct measure of loss in cases concerning payment of unlawful dividends and on the scope of the discretion under section 212 of the Insolvency Act.

Peter Knox QC, Aidan Casey and Helen Pugh appeared on behalf of Mr Holland.

Click here to see a copy of the judgment.

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