Company and Financial Law

Last week the Court of Appeal confirmed the High Court’s finding last year that, in some circumstances, a parent company could be found to owe a duty of care to an employee of a subsidiary.

The judgment sets out a four stage test for when the law may impose on a parent company responsibility for the health and safety of its subsidiary’s employees.

UPDATE 29 April 2012: The Court of Appeal has agreed with the High Court and confirmed that a parent company may owe a duty of care to an employee of a subsidiary, as we discuss in this post.

In Chandler v Cape, the High Court found that a holding company had, and had breached,  a duty of care (in this case, in relation to health and safety) to an employee of a subsidiary company.

Serious Fraud Office is looking to recover more dividends paid by companies that have breached anti-corruption laws

Last week the Serious Fraud Office took the innovative approach of using proceeds of crime legislation to recover dividends paid by Mabey and Johnson Limited to its parent shareholder, as we reported in this post. Mabey and Johnson had previously admitted corruption and breaches of UN sanctions.

This was the first time that the SFO has pursued dividends paid to shareholders who may be entirely unaware of the corrupt actions of the company paying the dividend. The SFO’s Director, Richard Alderman, stated his belief that institutional shareholders should “satisfy themselves” as to the business practices of the companies in which they invest. That provoked various comment that the SFO was adding to the governance burdens placed on institutional shareholders (see, for example, in the FT, “Fund managers should not have to police bungs abroad“).

“There are other cases we are looking at where we shall do this again”

In a speech yesterday at a Transparency International Anti-Bribery Training Launch (and see here for the free Bribery Act training materials made available at that launch), Mr Alderman reacted to this criticism and stressed his view that investors have a duty to engage with their investee companies on corruption and compliance issues:

Proceeds of crime legislation allows Serious Fraud Office to target dividends received by shareholders

The Financial Times reports today that the Serious Fraud Office has won a civil recovery order against the shareholder of a company that admitted corruption. Mabey Engineering Holding has agreed to repay a £131,201 dividend it received from Mabey and Johnson Limited, which admitted corruption and breaches of UN sanctions in relation to work in Iraq.

This power of the SFO means that it is able to pursue dividends paid to shareholders who may be entirely unaware of the corrupt actions of the company paying the dividend.
The FT reports the SFO as emphasising that it will not hesitate to pursue third-party investors (which would include institutional or private equity investors) who receive dividends paid by listed companies which are convicted of illegal activity, and quotes the director of the SFO as stating that investors should be obliged to satisfy themselves as to the business practices of the companies in which they invest.