UK Law and Practice Contributed by: Simon Bushell and Gareth Keillor, Seladore Legal
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 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 “shadow director” of the company in that they exercise control and influence over its business decisions, and the actual directors act in accord - ance 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 company 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 con - stitution. 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 Plaintiff Importantly, directors’ duties are owed to the company itself, rather than to individual share - holders. This means that, under English law, where a wrong is committed against a company, the proper plaintiff 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 direc - tor 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 sharehold - ers) to bring “derivative action” on behalf of the company. The central question for any court considering whether or not to allow a derivative action is whether a wrong committed 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 law has developed to reflect this. It con - tinues to be a popular environment in which to resolve international fraud claims. As a corollary to this, English courts have developed a num - ber of rules to join overseas parties to English proceedings, and/or to initiate proceedings in England against such parties. Where a party is located outside the jurisdiction, it will be necessary for the claimant to obtain the court’s permission to serve out of the jurisdic -
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