Eclairs Group Ltd v JKX Oil & Gas plc [2015] UKSC 71

Court: Supreme Court

Facts: JKX Oil & Gas Plc issued restriction notices to shareholders E and G, who were involved in a corporate raid. This was done under Article 42 of the company's constitution, which allowed restrictions if the company believed the information provided was false.

Issue: Did the issuance of restriction notices constitute an improper use of director’s powers under s171 CA 2006?

Held: The Supreme Court held that the directors acted with an improper purpose.

Key Judicial Statement: Lord Sumption proposed that a ‘but-for’ test should be applied to determine if a decision was made for an improper purpose, i.e., if the decision would not have been made but for the improper purposes.

💡 Leveluplaw: When assessing whether directors have acted for an improper purpose, the "but-for" test can be applied to see if the decision would not have been made without the improper purposes. Improper purposes make the decision ineffective, even if other legitimate purposes were also considered.