Tuesday, 7 December 2010

UK: England and Wales: the Duomatic principle and the company's financial circumstances

Judgment was given yesterday in Secretary of State for Business, Innovation and Skills v Doffman [2010] EWHC 3175 (Ch): see here.  The case concerned an application for the disqualification of several directors brought by the Secretary of State under Section 6 of the Company Directors Disqualification Act (1986). In this regard the trial judge was required to consider the operation of the so-called Re Duomatic principle, which takes its name from Re Duomatic Ltd. [1969] 2 Ch 365, in which Buckley J. stated (at p. 373): "[W]here it can be shown that all shareholders who have a right to attend and vote at a general meeting of the company assent to some matter which a general meeting of the company could carry into effect, that assent is as binding as a resolution in general meeting would be". With regard to the Re Duomatic principle, the trial judge in Doffmann observed (paras. [44] and [45]):

... a company's financial circumstances may preclude the application of the Duomatic principle. While the interests of a company are normally identified with those of its members, the interests of creditors can become relevant if a company has financial difficulties ... It has been said that the interests of creditors can "intrude" (and the application of the Duomatic principle can, accordingly, be barred) even when a company may not strictly be insolvent".

No comments: