UK: England and Wales: directors' duties and an unauthorised profit

Judgment was delivered yesterday in Parr v Keystone Healthcare Ltd [2019] EWCA Civ 1246, the Court of Appeal having given its decision at the end of the hearing on July 9. The court dismissed the appeal and upheld the trial judge's finding (at [2018] EWHC 1509 (Ch)) that Mr Parr, a former director and shareholder of a company, Keystone, was liable to disgorge half the proceeds he had received when he sold his shares in the company to another company. Mr Parr received the full proceeds in circumstances where, had he disclosed his breach of duty (participating in a fraud and failing to disclose his own misconduct) he would have received only half.

The court's decision represents a strong affirmation of the 'bright line' nature of the prohibition against profits imposed on company directors as part of their general duties under the Companies Act 2006. The court made clear that Keystone was entitled to recover from Mr Parr the unauthorised profit even though Holdings had suffered the loss and regardless of whether Keystone itself could have made the profit.