Abouraya v Sigmund [2014] EWHC 277 (Ch)

Facts

  • Mr. Abouraya was a shareholder in Anthea UK Limited (the first defendant).
  • Anthea UK Limited wholly owned Anthea Overseas Limited (the second defendant).
  • Mr. and Mrs. Sigmund, as directors of Anthea Overseas, were alleged to have improperly taken assets from that company for personal gain.
  • The Sigmunds exercised control over both Anthea Overseas and Anthea UK, effectively preventing any independent action by the companies.
  • Mr. Abouraya sought to bring a derivative claim on behalf of Anthea Overseas against the Sigmunds for their alleged misconduct.

Issues

  1. Whether a shareholder of a parent company can bring a derivative claim concerning wrongs committed against a subsidiary under common law and the Companies Act 2006.
  2. Whether the statutory framework, particularly Part 11 and section 260(3) of the Companies Act 2006, permits multi-level derivative actions.
  3. Whether there was sufficient evidence of director misconduct and wrongdoer control at both the subsidiary and parent levels to justify permitting the claim to proceed.

Decision

  • The court held that a shareholder may bring a multi-level derivative claim in cases where wrongdoers control both the parent and the subsidiary, prohibiting the companies themselves from acting.
  • The court found there was a strong initial case that the Sigmunds breached their duties and controlled both Anthea Overseas and Anthea UK.
  • The Companies Act 2006, including section 260(3), did not operate to exclude or restrict the possibility of multiple derivative actions.
  • The requirements of Part 11 of the Companies Act 2006, such as court approval, remain mandatory for such claims to progress.

Legal Principles

  • The case extends the "wrongdoer control" exception to the rule in Foss v Harbottle to multi-level corporate structures, allowing derivative actions even when harm is to a subsidiary.
  • Statutory derivative claims under the Companies Act 2006 incorporate, but do not restrict, the common law exceptions permitting these actions where control by alleged wrongdoers exists.
  • Claimants must show misconduct, wrongdoer control at the relevant company levels, that the claim serves the company’s interests, and comply with statutory requirements, including court approval.

Conclusion

Abouraya v Sigmund [2014] EWHC 277 (Ch) established that shareholders may initiate multi-level derivative actions where both parent and subsidiary companies are under the control of alleged wrongdoers, clarifying and reinforcing the application of common law and statutory principles in group company structures. This case serves as an important resource for understanding derivative claims and minority shareholder protections within complex corporate arrangements.

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