Cedar Mundi (Holding) Sal v Bassel Attieh & Ors

A board of a Lebanese joint-stock company may manage regular operations, but cannot, without the appropriate general-assembly authority, dispose of substantially all its investment assets in a transaction bringing the fund operation to an end. For a related-party transaction, Article 158 requires board consideration, reports and general-assembly ratification; authorisation is ineffective until ratified. A conflicted director must not participate in the voting process, and fraud or concealment may invalidate authority. The good-faith and benefit exceptions are narrow. A counterparty must be a true stranger acting in ignorance of the control procedure, and the transaction must positively benefit the company. A substantial undervalue is neither beneficial nor harmless. Later retention of consideration did not ratify the transaction.

These consolidated first-instance proceedings arose from Cedar II’s claim, CL-2023-000767, seeking declarations that the SPA was valid and that it acquired the relevant investment assets, together with Cedar Mundi’s counterclaim and separate claim, CL-2024-000488, against the defendants. The proceedings were consolidated on 24 October 2024.

The dispute concerned an unauthorised 2020 transfer of much of Cedar Mundi’s portfolio to IFAC and a proposed 2021 sale of the portfolio to Cedar II. The principal issues were the authority of the board under Articles 157 and 158 of the Lebanese Code of Commerce, the construction of the 13 April 2021 board minutes, conflicted voting, fraud, ratification, the alleged MABIL overpayment and breach of fiduciary duty. The central question was whether the transactions were valid without general-assembly approval and ratification.

1. Validity. The 2021 Transaction was void. Article 157 of the Lebanese Code of Commerce confined the board to acts necessary for regular operation. The disposal of substantially the whole investment portfolio was a major act of disposition requiring general-assembly authority. In any event, the transaction brought the fund’s operation to an end and required an extraordinary general assembly.
2. Related-party control. Article 158 required disclosure, board consideration, reports to the general assembly and auditors, and general-assembly ratification. Its final sentence meant that authorisation was ineffective until ratified. Cedar II was not an independent stranger and was not acting in ignorance of the Article 158 procedure. The transaction was substantially undervalued and therefore was neither beneficial nor harmless to Cedar Mundi.
3. Board minutes and voting. Read as a whole, and in light of the surrounding communications and conduct, the 13 April 2021 minutes made the board’s authorisation conditional upon later general-assembly deliberation and ratification. Mr Attieh’s resignation from Fastnet was a genuine legal act undertaken with fraudulent intent to evade Article 158. He was therefore treated as conflicted. His participation in the voting process invalidated the authorisation.
4. Fraud and ratification. The concealment of the 2020 Transaction before the 13 April meeting constituted fraud in the broad sense and independently vitiated the authority relied upon. The later board resolutions, retention of the consideration and automatic bank deductions did not amount to ratification because they were not unequivocal, Cedar Mundi lacked full knowledge of material matters, and no body with the necessary authority had ratified the transaction.
5. Other issues. The 2020 Transaction was also unauthorised and void. MABIL’s alleged overpayment was a capital contribution under the SCFA, not a repayable debt; its restitution claim failed because the payment had a contractual basis. Mr Attieh breached Lebanese fiduciary duties of loyalty, good faith and diligence. The remaining claims, declarations, proprietary orders, valuation remedies, bonus issues and costs were deferred to consequentials.

High Court (Commercial Court) The judgment records that Cedar II commenced claim CL-2023-000767, Cedar Mundi brought a separate claim CL-2024-000488, and the proceedings were consolidated on 24 October 2024. No appellate history is stated.