Finance litigation update - July 2022

FINANCE LITIGATION UPDATE – JULY 2022 29 "usual English company law sense" but included "senior executives responsible for managerial decisions affecting the future developments and business prospects of the issuer and/or those business units"4. Decision Miles J agreed with the Defendant's contention that the statutory definition of PDMR set out in Schedule 10A is "clear and unambiguous"5 Expanding the scope of this definition to include senior executives would be contrary to legislative intent, given that paragraph 8(5)(c) of Schedule 10A makes clear that senior executives may be considered PDMRs where there are no directors (and therefore that senior executives do not otherwise fall within the definition of PDMR). A wider definition of PDMR would also "sidestep[…] the legislative history" of section 90A: when section 90A was enacted, there was a broader definition of PDMR in Part 6 of FSMA, which was not adopted.6 Miles J also rejected the Claimants' submission that ascribing the conventional legal meaning to the term "director" in this context "would facilitate abuse and allow issuers to arrange their corporate affairs to deliberately avoid civil issuer liability under section 90A". It would, he held, be "inherently far-fetched" that public companies would structure their organisations with the intention of avoiding liability under section 90A of FSMA.7 However, despite rejecting the Claimants' submissions on the definition of a PDMR, Miles J refused the Defendant's application for strike out and summary judgment, as he considered that the Claimants had a real prospect of persuading the Court at trial that the Subsidiary Directors were de facto directors of the Defendant. He emphasised that the question of whether an individual is a de facto director is "intensely fact-sensitive" and requires a "careful examination of the relevant company's governance structure".8 In reaching this conclusion, Miles J considered the decisions of Hildyard J in Secretary of State for BIS v Chohan9 and Falk J in Re Keeping Kids Company10, both of which concerned the existence of de facto directorships. 4 Various Investors v G4S Limited, at paragraph 8. 5 Various Investors v G4S Limited,at paragraph 119. 6 Various Investors v G4S Limited, at paragraph 136. 7 Various Investors v G4S Limited, at paragraph 146. 8 Various Investors v G4S Limited, at paragraph 172. Analysis Miles J's decision makes it clear that the definition of PDMR for the purposes of section 90A and Schedule 10A should be confined to the "natural reading"11 of the "clear and unambiguous"12 definition set out in Schedule 10A. Flexibility may, however, be found in the concept of de facto directorship: individuals who are found, on a detailed factual assessment, to have participated in decision making at a directorial level may be considered directors (and therefore PDMRs) for the purposes of section 90A and Schedule 10A. The extent of this flexibility will be clarified at the next stage of proceedings. Ben Sigler, Sean Jeffrey, Lucy Walsh and Harriet Campbell 9 [2013] EWHC 680 (Ch). 10 [2021] EWHC 175 (Ch). 11 Various Investors v G4S Limited, at paragraph 140. 12 Various Investors v G4S Limited, at paragraph 119.