Richard Nolan

THE CONTINUING EVOLUTION OF SHAREHOLDER GOVERNANCE

THE law which governs decision-making by the shareholders (or, strictly speaking, members) of a company is an area in which there is a great emphasis on regulation. This emphasis has tended to obscure the basic principles of law around which that regulation has developed. It has also distracted attention away from an appreciation of how those principles are applied and developed in practice.

The Legal Control of Directors' Conflicts of Interest in the United Kingdom: Non-Executive Directors Following the Higgs Report

This paper makes the case for using the independent non-executive directors of a company listed in the United Kingdom exclusively as monitors and regulators of management, particularly as regulators of executive directors’ conflicts of interest, rather than as participants in management who also have a control function. It is suggested that these proposals can be accommodated within current (and anticipated) corporate law in the United Kingdom, that they are practicable, and that they are desirable. The proposals are made against the background of a continued strong emphasis in the United Kingdom on non-executive directors’ dual role both as managers of a company’s business and as monitors of its executive directors. It is suggested that this dual role for non-executive directors tends significantly to undermine the effectiveness of their control function, and that consequently the dual role should be abandoned in favor of the more focused role proposed in the paper. Improving the effectiveness of non-executive directors as regulators of executive directors’ conflicts of interest is vitally important to corporate governance in the United Kingdom: as the paper explains, other legal methods of controlling those conflicts in the United Kingdom suffer from serious deficiencies.

Indirect Investors: A Greater Say in the Company?

This article considers the Company Law Reviews proposals for enfranchising indirect investors in shares. The article conducts the first detailed survey of current UK practice in the area, and, in the light of the surveys results, concludes that the CLRs proposals by themselves will not advance the law much beyond present practice. There are, however, other ways in which the CLRs welcome policy objectives might be achieved. These are examined and assessed. Finally, the article makes proposals for reform of the law concerning shareholder voting, both as regards companies and as regards nominee shareholders.

Shareholder Rights in Britain

This article examines the historical, doctrinal and theoretical bases of shareholder rights in British company law. These rights are, and always have been, essentially the product of private bargains, subjected to regulation of various explicit and implicit forms. This legal framework has significant normative advantages: it facilitates the development of innovative and efficient corporate structures. That is demonstrated through empirical evidence and examples from British corporate practice. One key example is how so-called ‘indirect investors’ in a company — the large and economically significant group of people who invest in a company through intermediaries such as nominees and depositaries — can be accommodated within the governance structure of the company, even though they are not themselves shareholders in the company and so are not directly party to its internal governance mechanisms. With this domestic legal background in mind, the article finally addresses and assesses the impact and effect of the proposed EU Shareholder Rights Directive on British company law and practice.

Exploring Private Law: Good faith: what does it mean for fiduciaries, and what does it tell us about them?

Introduction Good faith is said to be central to fiduciary duties: it is said to be one of the core duties of a fiduciary in the execution of his office. Yet it is equally true that duties of good faith apply to others, who are undoubtedly not fiduciaries. How can this apparent inconsistency be explained? How can a central duty affecting fiduciaries be a duty which, if far from ubiquitous, is apparently much more common than its application to fiduciaries? Answering these questions is vital to understanding the scope and function of fiduciary doctrine. The way forward is to recognize the fundamental point that legal duties, like all other things, can be categorized in different ways for different purposes: it is conceptually meaningless to categorize other than in a teleological fashion. This chapter addresses the application of that observation to duties of good faith in order to show that it is possible for such duties to apply to persons who are not fiduciaries, while at the same time meaning something unique when they are applied in the fiduciary context. Some introductory observations on legal categorization In seeking to understand a complex set of duties, such as the duties that apply to fiduciaries, one can legitimately ask different questions about those duties, to different ends. There is more than one way to skin a cat.

VANDERVELL v. I.R.C. : A CASE OF OVERREACHING

T HE decision of the House of Lords in Vandervell v. IRC [1967] 2 AC 291 is difficult to explain but highly convenient in everyday commerce. This article uses the doctrine of overreaching to explain and justify their Lordships’ approach to the formalities for dealing with trust property at the direction of beneficiaries. It seeks to explore the limits of that justification, and thereby suggest answers to practical questions left unresolved by the decision. These questions remain highly relevant, particularly in the age of widespread electronic communication without formality.

FRAUD, TRUSTS AND EQUITIES

M r . and Mrs. Collings were the unremarkable registered proprietors of their house, until they had the misfortune to deal with Mr. Lee. Lee purported to act for them in finding a purchaser for the house, and he found a Mr. Styles. Mr. and Mrs. Collings then executed a transfer of the house to Styles in consideration of £250,000, but “Styles” was simply an alias used by Lee, and no part of the £250,000 was ever paid to them. The net result, therefore, was that Lee fraudulently procured the transfer of the house from Mr. and Mrs. Collings to himself, for no consideration. Once registered as proprietor of the house, Lee mortgaged it to the Leeds Permanent Building Society and took the mortgage proceeds. Mr. and Mrs. Collings remained in actual occupation of the house throughout. When Lee’s fraud came to light, Mrs. Collings sought rectification of the register, to reinstate her as proprietor of the house free of the mortgage. (Her husband had died in the meantime, and she had acquired his rights by survivorship.) The Court of Appeal upheld her claim: Collings v. Lee [2001] 2 All E.R. 332.

HOW KNOWING IS KNOWING RECEIPT

DIRECTORS of BCCI (Overseas) Ltd. deliberately applied its funds in breach of their duties, and Chief Akindele received those funds. Later, the company, acting by its liquidator, sued Chief Akindele both for knowing receipt of the misapplied funds and for dishonestly assisting their misapplication. The High Court dismissed the claim for dishonest assistance: the company could not prove that Chief Akindele had been dishonest. There was no appeal against this ruling. So at the very beginning of his judgment in BCCI (Overseas) Ltd . v. Akindele [2000] 4 All E.R. 221, which was the only reasoned judgment given in the Court of Appeal, Nourse L.J. stated the key remaining question about the claim for knowing receipt: “What must be the recipient’s state of knowledge? Must he be dishonest?”