Question

Select the most appropriate statement: In Standard Chartered Bank of Australia Ltd v Antico, the court held that the test for classifying an entity as a shadow director involves:

Select one:

a. None of these options apply

b. Checking whether the directors of the subsidiary company habitually comply with the instructions of the parent company, over a period

c. Checking whether the parent company has a nominee director on subsidiary company's board

d. Checking whether the parent company encouraged the subsidiary company to take out a loan

e. Whether the parent company influenced one of the business decisions of the subsidiary company

Answer 1

STANDARD CHARTERED BANK OF AUSTRALIA LTD VS ANTICO

Facts of the case is given as below: -

1. Pioneer International Ltd (Pioneer) had a 42% holding in its subsidiary Giant Resources Ltd (Giant) and appointed three nominee directors to Giant.

2. Giant had a number of financial agreements with the Standard Chartered Bank of Australia Ltd (Standard).

3. This included a discount and bill acceptance facility of $30 million, which had been extended multiple times by Standard.

4. When Giant went into liquidation and was wound up, Standard commenced proceedings against Giant, alleging insolvent trading under s 588G of the Corporations Act 2001 (Cth).

5. Standard claimed that Pioneer was a director of Giant and was liable for the insolvent trading. Issues Was Pioneer, the holding company of Giant, a director of Giant and therefore liable for insolvent trading?

IT WAS HELD BY THE COURT THAT,

1. Hodgson J held that Pioneer was indeed a shadow director of Giant: there was a particular willingness and ability to control Giant which Pioneer exercised.

2. The real source of decision making lay in Pioneer, rather than Giant, and as a result the Court determined Pioneer to be a shadow director.

3. When considering the above in respect of a holding company and its subsidiary, attention must be had towards the relevant circumstances, including the financial management of the company.

4. Pioneer was liable for insolvent trading.

The option given in the question are:-  

a. None of these options apply

b. Checking whether the directors of the subsidiary company habitually comply with the instructions of the parent company, over a period

c. Checking whether the parent company has a nominee director on subsidiary company's board

d. Checking whether the parent company encouraged the subsidiary company to take out a loan

e. Whether the parent company influenced one of the business decisions of the subsidiary company

Analysis: -

After analysing the above case, it is clear that Pioneer (Parent company) has influenced one of the decision of the (Giant) subsidiary.

Hence option "e" is correct.