UK Law and Practice Contributed by: Simon Bushell and Gareth Keillor, Seladore Legal
Obtaining Disclosure of Documents and Evidence From Third Parties ) in an effort to identify people involved in the fraud. The ability to take steps against persons unknown has become particularly significant in recent years given the rise of cyberfraud. Such orders show the English courts’ willingness to take a flexible and innovative approach when assisting victims of fraud. 2.9 Compelling Witnesses to Give Evidence The CPR allow a court to issue a summons requiring a witness located within the jurisdiction to attend court to give evidence or to produce documents. This pow - er is in addition to the orders requiring third parties to provide specific information and material (see 2.3 Obtaining Disclosure of Documents and Evidence From Third Parties ), which are more likely to be uti - lised in a fraud claim. 3. Corporate Entities, Ultimate Beneficial Owners and Shareholders 3.1 Imposing Liability for Fraud on a Corporate Entity As a general rule, English law holds that a company acts through its board of directors and senior offic - ers, and that the actions and states of mind of those individuals will be attributed to the company. Similarly, companies will normally be vicariously liable for the actions (including fraudulent actions) of employees and agents where they are acting within the scope of their employment or authority. 3.2 Claims Against Ultimate Beneficial Owners Under English law, it is extremely difficult to “pierce the corporate veil” so that a beneficial owner of a company will become liable for the actions of the company. Such claims will normally only exist where the beneficial owner is effectively a “shadow director” of the company in that they exercise control and influ - ence over its business decisions, and the actual direc - tors act in accordance with their instructions. Where this occurs, the beneficial owner will have the same duties as an actual director (see 3.3 Shareholders’ Claims Against Fraudulent Directors ).
The more common approach for bringing a claim against the beneficial owner of a fraudulent compa - ny is to bring a claim of conspiracy (as discussed in 1.3 Claims Against Parties Who Assist or Facilitate Fraudulent Acts ). 3.3 Shareholders’ Claims Against Fraudulent Directors Individual directors must act with good faith within the powers set out in the company’s constitution. They must also exercise reasonable care, skill, diligence and independence, and seek to promote the success of the company. Undertaking fraudulent or dishonest activity in a way that harms the company will clearly breach these duties. The Company as Claimant Importantly, directors’ duties are owed to the com - pany itself, rather than to individual shareholders. This means that, under English law, where a wrong is com - mitted against a company, the proper claimant in any subsequent claim is the company itself (rather than the shareholders of the company). Accordingly, under normal circumstances, any enforcement action against an individual director will generally be taken by the board or (in an insolvency situation) a liquidator. Importantly, the principle of “no reflective loss” means that a shareholder cannot bring a claim in respect of a loss suffered by the company where the company itself has a cause of action in respect of the same wrongdoing. Derivative Actions In some circumstances, it is possible for an individual shareholder (or a group of shareholders) to bring a “derivative action” on behalf of the company. The cen - tral question for any court considering whether or not to allow a derivative action is whether a wrong com - mitted against the company would not be adequately redressed if the action were not allowed to proceed. 4. Overseas Parties in Fraud Claims 4.1 Joining Overseas Parties to Fraud Claims For many years, England has been a prominent and leading venue for international disputes, and English
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