On 6 April 2011, the Supreme Court gave its judgment in the Enviroco case. It confirmed the Court of Appeal’s decision that, as a result of a holding company’s pledge of shares in a subsidiary, and the registration of the shares in the name of the bank’s nominee by way of security, the subsidiary was no longer a subsidiary within the meaning of the Companies Act 1985. The decision applies equally in the context of the definition of subsidiary in the Companies Act 2006.
As a result, Enviroco will continue to have consequences where a full legal mortgage of shares is taken as security, or where an equitable charge over shares is perfected – usually upon the occurrence of an event of default. Both of these scenarios involve the transfer of legal title to the shares to and registration in the name of the charge holder.
Farstad Supply A/S v Enviroco
For the full case report, click here