- May 20, 2016
- Posted by: Josiah Hincks Solicitors
- Category: Business Law Updates
Those at the helm of companies are obliged by law to put their own interests second to those of shareholders. In one case that highlighted the point, a logistics company had launched proceedings against its own former chairman, chief executive and finance director, accusing them of perpetrating $160 million frauds.
The three men were, amongst other things, accused by the publicly listed company of fraudulently authorising payments of $102 million to a purportedly independent building contractor in respect of construction of a logistics centre and industrial park in Kazakhstan. It was alleged that the contractor was secretly controlled by the trio and that the construction project barely got off the ground.
The former chairman argued that his role within the company had been essentially non-executive and that he was not responsible for any of the relevant transactions. The ex-chief executive and finance director also denied dishonesty, insisting that they had at all times acted for commercial reasons and in the company’s interests.
The company had ultimately reached a financial settlement with its former chairman but had continued its claim against the other two men. They in turn had launched a claim against the ex-chairman, arguing that he should be required to contribute to any sums that they might in due course be ordered to pay to the company.
In refusing permission to bring the latter proceedings, however, the High Court noted that, given the nature of their own defences to the company’s claim, the former chief executive and finance director had shied away from alleging fraud against the former chairman. They had put forward no positive case against him and could not piggy-back on the factual allegations that had been made against him by the company prior to the settlement.