15th Oct 2017 | Articles

Natasha Jackson is featured in the Corporate Resuce and Insolvency Journal with her article: Limits to the Duomatic principle: Randhawa v (1) Turpin (2) Hardy (as former Joint Administrators of BW Estates) [2017] EWCA Civ 1201 .


KEY POINTS

  • ––The Duomatic principle is the common law principle that permits decision-making by shareholders through informal unanimous consent.
  • ––Crucially, for the principle to apply, it is essential that:
    • ––all of the shareholders with a right to vote must unanimously consent;
    • ––that they are competent to perform the act being validated;
    • ––and that consent must be given with full knowledge as to what is being consented to.
  • ––Provided these conditions are met, formality is not a pre-condition to the validity of the act.
    ––Where one of the registered shareholders is a corporation that no longer exists, then the Duomatic principle simply cannot apply.
  • ––The judgment in Re BW Estates also demonstrates an application of authorities regarding abuse of process and acquiescence estopping a party from bringing proceedings, which may be of assistance to practitioners seeking to raise or counter such arguments in insolvency proceedings.

BACKGROUND

BW Estates was incorporated on 13 January 1986, with Robert Williams subscribed to 75 shares and his wife, Pauline, subscribed to 25. Robert and Pauline were BW Estates’ directors until 2009.

Around 1988/89, Pauline’s shares were transferred to Belvadere Investment Company Ltd (‘Belvadere’), a company incorporated in the Isle of Man (which may be an alter ego of Robert). Belvadere was dissolved in 1996, and its assets accordingly passed bona vacantia to the Crown. The company was not, however, removed from the register of members of BW Estates.

In August 2009, Robert resigned as a director of BW after undertaking to the court not to act as a director of any company. His son, David, was appointed in his place (although it was alleged that he was accustomed to act on his father’s instructions).

An order was made against BW Estates in favour of the Randhawas in November 2012, with directions for damages to be assessed and an interim payment on account. Robert was also ordered to state to his knowledge who owns the shares in Belvadere, to which he replied that he did not know but understood that the company had been liquidated. A final judgment was made on 12 June 2013 by HHJ Simon Brown in the amount of £2,158,891.79, plus indemnity costs.

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This article was first featured in the Corporate Resuce and Insolvency Journal.


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