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As a result of a holding company’s pledge (to a bank) of shares in its subsidiary and the registration of the shares in the name of the bank’s nominee by way of security (the security being governed by Scottish law), the subsidiary ceased to be a subsidiary of the holding company within the meaning of sections 736 and 736A of the Companies Act 1985.
The decision, in the case of Enviroco Ltd v Farstad Supply A/S [2009] EWCA Civ 1399, which overturned the High Court’s decision, raises questions for practitioners in relation to sections 736(1)(b) and (c) of the Companies Act 1985 and sections 1159(1)(b) and (c) of the Companies Act 2006 (which replicate section 736(1)(b) and (c)) and leaving implications in areas including tax, company law, finance, employment and contract law.
Enviroco Limited has submitted an application for leave to appeal the Court of Appeal decision but no hearing date has been set.