Allianz Global Investors GmbH & Ors v G4S Limited (formerly known as GS4 PLC)

For civil liability under section 90A of Financial Services and Markets Act 2000, where an issuer has directors, the persons discharging managerial responsibilities are its directors, including de facto and arguably shadow directors. Senior executives who are not directors do not fall within the definition merely because they make important managerial decisions.

The question whether an individual is a de facto director is fact-sensitive. It requires an objective and cumulative assessment of the company’s governance structure, the individual’s actual functions and conduct, and whether the individual participated at directorial level. In a complex holding-company structure, that question may require disclosure and trial and will not ordinarily be suitable for summary determination.

Institutional investors brought three related claims against the issuer of publicly traded securities under section 90A and Schedule 10A of Financial Services and Markets Act 2000. They alleged that published information concerning wrongful billing and a financial model fraud was misleading, incomplete, or dishonestly delayed.

The defendant applied under CPR 3.4 and CPR 24.2 to strike out or obtain summary judgment on allegations that four senior executives, P1 to P4, were persons discharging managerial responsibilities. The central issues were whether the statutory definition extended beyond directors and, if not, whether P1 to P4 had a real prospect of being found to be de facto directors of the defendant.

1. The application to strike out or obtain summary judgment on the allegations concerning P1 to P4 was refused.
2. The definition in paragraph 8(5) of Schedule 10A to Financial Services and Markets Act 2000 is exhaustive. Where an issuer has directors, paragraph 8(5)(a) applies and the relevant persons are its directors, including persons occupying the position of director by whatever name called. Paragraph 8(5)(c) applies only where the issuer has no person within paragraph 8(5)(a) or (b). It does not extend the definition to senior executives of an issuer that has directors.
3. The expression “director” bears its established legal meaning in this context. The statutory definition may include de facto and, arguably, shadow directors, but the court should not enlarge it to include persons who are not directors. The legislative scheme was intended to impose reasonable limits on issuer liability and to promote legal certainty.
4. The claimants’ pleadings, although insufficiently clear, were capable on balance of amounting to a case that P1 to P4 occupied the position of directors. The pleadings should identify more clearly the category of directorship relied upon and should not leave the case dependent on the rejected wider construction.
5. Whether a person is a de facto director is intensely fact-specific and is determined objectively, as a matter of fact and degree, by the cumulative effect of the person’s actual functions and conduct in the company’s governance structure. The court must consider whether the person participated, or could participate, at the highest, directorial level of decision-making. Functions properly performed by a subordinate manager are insufficient.
6. The evidence provided an adequate foundation for the allegation. The defendant was a holding company operating through subsidiaries and a group executive structure. The roles, authority, accountability, decision-making functions and holding out of P1 to P4 required disclosure and witness evidence. The claimants therefore had real, rather than fanciful, prospects of establishing at trial that P1 to P4 were de facto directors.

The judgment was a first-instance decision on applications in three related actions. The judgment records that earlier applications in Case 1 were determined by Mann J on 10 March 2021, but those proceedings were not an appeal from that decision.