Civil Actions by Shareholders against an Insolvent Issuer: Soden v British & Commonwealth Plc
| Date | 01 April 1998 |
| Published date | 01 April 1998 |
| Pages | 143-145 |
| DOI | https://doi.org/10.1108/eb025874 |
| Author | Adrian Walters |
| Subject Matter | Accounting & finance |
Journal of Financial Crime — Vol. 6 No. 2 — Securities Regulation
SECURITIES REGULATION
Civil Actions by Shareholders against an Insolvent
Issuer: Soden v
British
& Commonwealth Plc
Adrian Walters
INTRODUCTION
X acquires securities of a company, Y plc. It tran-
spires that Y plc has induced X to acquire the
securities by a misrepresentation as to the under-
lying asset worth of Y plc. Y plc subsequently goes
into insolvent liquidation. Should X's claim against
Y plc for damages arising from the misrepresenta-
tion be subordinated to the claims of
Y
plc's cred-
itors? This question fell to be determined by the
House of Lords in the recent English case of
Soden
v British & Commonwealth
Plc.1
The facts and key
issue of the case can be summarised briefly. British
& Commonwealth Plc (B&C) acquired the entire
issued share capital of Atlantic Computers plc
(Atlantic), the holding company of a large cor-
porate group, by means of a successful takeover
offer having first built a stake in Atlantic through
market purchases. The acquisition proved ruinous
and both B&C and Atlantic were placed in admini-
stration under the provisions of UK insolvency
legislation.2 B&C subsequently issued proceedings
claiming damages from Atlantic (and its directors)
on the footing that B&C had been induced to
acquire the shares by a misrepresentation as to the
value of Atlantic's assets and business. The pro-
ceedings were somewhat unusual in that they
involved a parent company seeking to recover
damages directly from its subsidiary which were
designed to reflect the loss suffered by the parent
arising from the acquisition of the subsidiary.3 The
question for their Lordships was whether any
damages ordered to be paid by Atlantic in these
Page 143
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