Newgate Stud Co v Penfold
A nominee director appointed to represent a shareholder must still act in the interests of the company, although he may take account of the appointing shareholder's interests where they are not in conflict.
Facts
Newgate Stud Co was a company that bred and owned racehorses. A director, Mr Penfold, was appointed as a nominee of one of the shareholders. Claims were brought against Mr Penfold and others alleging that they had breached their duties in connection with transactions involving the company's horses, and the question arose as to the duties owed by a nominee director.
Legal principle
David Richards J considered the position of nominee directors. He said that a nominee director, appointed by a shareholder, owes his duties to the company, not to the shareholder who appointed him. He may take account of the interests of the shareholder who appointed him, as long as he does not prefer them to the interests of the company, and in a case of conflict, his duty to the company must prevail. The case is relevant to the duty to exercise independent judgment, now in section 173 of the Companies Act 2006.
Related cases on directors' duties: conflicts of interest
- Aberdeen Railway Co v Blaikie Brothers (1854) 1 Macq 461
- Bhullar v Bhullar [2003] EWCA Civ 424, [2003] 2 BCLC 241
- CMS Dolphin Ltd v Simonet [2001] 2 BCLC 704
- Cook v Deeks [1916] 1 AC 554
- Foster Bryant Surveying Ltd v Bryant [2007] EWCA Civ 200
- Fulham Football Club Ltd v Cabra Estates plc [1994] 1 BCLC 363
- Guinness plc v Saunders [1990] 2 AC 663
- Imageview Management Ltd v Jack [2009] EWCA Civ 63, [2009] Bus LR 1034
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