fbpx

Duomatic Principle – What is it and when NOT to use it!

Jul 22, 2021

The Duomatic Principle is the common law principle of decision-making by shareholders through informal unanimous consent, preserved in s281(4) of the Companies Act 2006. The Duomatic Principle allows shareholders of a company to informally approve the company’s actions without the need to hold a general meeting, as long as the approval is unanimous. The Duomatic Principle provides for greater flexibility and is primarily used in urgent or time-sensitive cases where shareholder resolution formalities cannot be carried out.

Where a matter is within the scope of Duomatic Principle, the following must be established for the principle to apply:

  • The consent of shareholder to the relevant matter must be unanimous
  • The consent must be given by shareholders in full knowledge of the relevant matter, if it is not, the principle will not apply.

It is important to be aware of the limitations to the Duomatic Principle. The Duomatic Principle will not apply if a formal member’s resolution would have been invalid, (for example, because an action would have been fraudulent) then assent using the Duomatic Principle would also be considered invalid and during insolvency where the resulting transaction may cause loss to the creditors of the company or the company’s insolvency. This was reiterated in the case of Henry v Finch [2015] ALL ER (D) 96, where the directors had utilised Duomatic Principle to carry out company transactions. The Court held that some of the transactions were invalid and stated that if a formal members’ resolution had been made, the resolution would be considered invalid. As a result, the Duomatic principle was invalid and should not have been relied upon by the shareholders.

Filing obligations

There may also be filing obligations involved in relation to decisions as a result of Duomatic Principle. The general rule is, if a matter that has been agreed by Duomatic Principle is required to be filed (had it had been passed by special resolution), then a copy of that agreement or a memorandum of its terms should be filed at Companies House.

The application of Duomatic Principle is a minefield and there has been a lot of case law relating to its use and application over the past 30 years. It therefore remains prudent to utilise he more formal shareholder resolutions. for further details regarding formal shareholder resolutions, please see our 4 part series on Company Resolutions.

For further information regarding Duomatic Principles, or corporate advice surrounding a company transaction, please contact Michelle.Lamberth@herrington-carmichael.com.

This reflects the law at the date of publication and is written as a general guide. It does not contain definitive legal advice, which should be sought as appropriate in relation to your own particular matter before action is taken.

Michelle Lamberth

Michelle Lamberth

Senior Paralegal, Corporate and Commercial Law

Sign up

Enter your email address for legal updates on Corporate and Commercial law.

Please see our privacy policy regarding use of your data.


Contact Us

    The information you submit will be handled in accordance with our privacy policy.

    Latest Articles

    Podcasts

    The Legal Room UK Podcast features a diverse range of specialists offering expertise on a variety of topics. 
    Subscribe on whatever podcast platform you use.

    Top Legal Insights

     

    Contract Law

    Material Breach of Contract

    What is a ‘material’ breach of contract by a party to a commercial contract? This is a critical issue regularly considered by the courts. What constitutes a material breach and what are the remedies?

    Property Law

    Commercial Lease: The Financial impact on Landlord and Tenant

    Coronavirus (COVID-19) and the restrictions now in place to control its spread, are having a significant effect on many business sectors.

    Divorce and Family Law

    Divorce in Lockdown: Can I get some discreet legal advice?

    We have spoken to clients who are unfortunately experiencing some family issues, and would like to obtain expert legal advice, yet don’t know how...

    Land & Property Dispute

    Restrictive Covenants – The Price of Modification

    Having identified that your land is burdened by a restrictive covenant and for the purposes of this article the covenant in question will be that only one residential building can be erected on the land. What do you do next?

    Wills, Trusts and Probate

    Why is having a will so important?

    It is entirely up to you if and when you want to create a Will, but it is important to be aware of the consequences of not having a Will.

    Award winning legal advice

    We are solicitors in Camberley, Wokingham and London. In 2019, Herrington Carmichael won ‘Property Law Firm of the Year’ at the Thames Valley Business Magazines Property Awards, ‘Best Medium Sized Business’ at the Surrey Heath Business Awards and we were named IR Global’s ‘Member of the Year’. We are ranked as a Leading Firm 2020 by Legal 500 and Alistair McArthur is ranked in Chambers 2020.

    London

    60 St Martins Lane, Covent Garden, London WC2N 4JS 

    +44 (0) 203 755 0557

     

    Camberley

    Building 2  Watchmoor Park, Riverside Way, Camberley, Surrey  GU15 3YL

    +44 (0)1276 686 222

     

    Wokingham (Appointment only)

    4 The Courtyard, Denmark Street, Wokingham, Berkshire RG40 2AZ

    +44 (0)118 977 4045

    info@herrington-carmichael.com

    © 2020 Herrington Carmichael LLP. Registered in England and Wales company number OC322293.

    Herrington Carmichael LLP is authorised and regulated by the Solicitors Regulation Authority.

    Privacy   |   Legal Notices, T&Cs, Complaints Resolution   |   Cookies   |   Client Feedback