Executive directors owe fiduciary and contractual duties to the company for which they work. Stobart Group Ltd v Tinkler examines the boundaries of those obligations in the context of a boardroom dispute and demonstrates that there are some steps that it will be illegitimate for a dissenting director to take in what he or she perceives as the best long term interests of the company.

Mr Tinkler was the ex-CEO of Stobart Group (the Company) and a significant shareholder. He remained an executive director after he stepped down from the CEO role. On 14 June 2018 he was removed from office by the Company and his employment was terminated on the grounds that he had acted in breach of his fiduciary duties to the Company and the contractual obligations in his service agreement. There were a number of issues before the Court relating to the actions of the Company and corporate governance issues more generally but this report focuses primarily on Mr Tinkler's actions as a dissenting director.

The background to the dispute was Mr Tinkler's concern that he was not being adequately remunerated, which led him to attempt to remove the Company's Chairman. He held discussions with shareholders in early 2018, in which he had expressed concerns about the Company's Chairman, Board and strategy. There were various behind-the-scenes discussions during April and May, in which Mr Tinkler made it clear to the Board that he would not support the Chairman's re-election at the Company's AGM. He wrote to shareholders in early June 2018 in his capacity as executive director and shareholder, expressing concerns about the Company and urging them to vote for a change of Chairman and subsequently forwarded that letter to all the Company's employees on 9 June. Following those events he was removed from office and summarily dismissed by a Board Committee with authority to exercise all powers of the Board.

The High Court decided that the Company was entitled to remove Mr Tinkler as a director and to dismiss him summarily because he had breached his contractual and fiduciary duties of loyalty and to act in the best interests of the Company by:

  • "Briefing against the Board" of the Company in order to foment shareholder dissatisfaction without giving the Board an opportunity to address any genuine concerns he had about corporate strategy;  
  • Writing the letter to shareholders, which was a further example of "briefing against the Board";
  • Forwarding that letter to employees, for which there was no justification and which was intended to undermine the confidence of the workforce in management; and
     
  • Sharing confidential information with a third party, which formed part of the plan to secure change within the Company.

This may not be the end of the fight – we are currently waiting to hear whether the Court of Appeal has granted permission to appeal the decision. 

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