Determining who is a director

Determining who is a director
When is a director not a director? Elizabeth Wilkinson

, of the litigation and dispute resolution group at Pannone Corporate LLP, examines the recent Court of Appeal case of Smithton Ltd v Naggar.

Original news

Smithton Ltd v Naggar [2014] EWCA Civ 939, [2014] All ER (D) 118 (Jul)

The claimant company claimed for loss suffered when two client companies defaulted on their obligations to pay margin calls under open-ended contracts for difference (CfD) entered into between the claimant and those two companies. The Court of Appeal, Civil Division, upheld the judge’s determination that the defendant had not been a director or shadow director of the claimant, nor had his conduct constituted a breach of the Companies Act 2006, s 190 (CA 2006).

What is the significance of this decision?

As Lady Justice Arden remarked in this case, the question of whether or not a director of a holding company has become a director of a subsidiary company arises commonly in practice. It is important to bear in mind this is a Court of Appeal decision, governed by the well-established principles of appellate review—in short, to determine the relevant law and to decide if it was correctly applied and, on facts, to determine if the judge was plainly wrong or not when assessing the weight to be attached to various facts.

In terms of significance, it is limited. The Court of Appeal follows, as it must, the leading Supreme Court decision on these issues, Holland v Revenue and Customs Comrs [2010] UKSC 51,

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