The Supreme Court has granted Enviroco leave to appeal the Court of Appeal's decision in Enviroco Ltd v Farstad Supply A/S.
In this case, the Court of Appeal held that where a parent company provided shares in its subsidiary as security for a loan and the shares were registered in the name of the lender, the subsidiary would no longer be a ‘subsidiary’ within the meaning of sections 736 and 736A of the Companies Act 1985 (now section 1159 Companies Act 2006). We reported on this case in the January edition of this Bulletin. Click here to read that report.
The decision is relevant to those drafting commercial agreements and defining "subsidiary" and "holding company" by reference to the statutory definitions. Without a close analysis of the factual position, this could result in a group company unintentionally falling outside the scope of an agreement.
The hearing before the Supreme Court will take on 20 and 21 October 2010 and we will report on the outcome then.
Click here to read the Court of Appeal's judgment