Re Barings plc (No 5)
Directors have a continuing duty to acquire and maintain a sufficient knowledge and understanding of the company's business to enable them properly to discharge their duties.
Facts
Barings Bank collapsed in 1995, after a trader in its Singapore office, Nick Leeson, made unauthorised trades on the futures markets, causing losses of about £827 million. The Secretary of State sought disqualification orders against several senior directors of Barings, on the basis that they had failed to supervise Mr Leeson properly and to understand the risks of the business he was conducting.
Legal principle
Jonathan Parker J made disqualification orders against the directors. He said that directors have, both collectively and individually, a continuing duty to acquire and maintain a sufficient knowledge and understanding of the company's business to enable them properly to discharge their duties as directors. While directors may delegate particular functions to those below them, the exercise of the power of delegation does not absolve a director from the duty to supervise the discharge of the delegated functions. The directors had failed to exercise any effective control over Mr Leeson's activities. The decision was upheld by the Court of Appeal.
Related cases on directors' duties: powers, judgment and care
- Bamford v Bamford [1970] Ch 212
- BTI 2014 LLC v Sequana SA [2022] UKSC 25, [2024] AC 211
- Re City Equitable Fire Insurance Co Ltd [1925] Ch 407
- Re D'Jan of London Ltd [1994] 1 BCLC 561
- Dorchester Finance Co Ltd v Stebbing [1989] BCLC 498
- Eclairs Group Ltd v JKX Oil & Gas plc [2015] UKSC 71
- Hogg v Cramphorn Ltd [1967] Ch 254
- Howard Smith Ltd v Ampol Petroleum Ltd [1974] AC 821
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