Duomatic principle

The decision in Re Duomatic concerned whether certain payments made to directors of a company were valid even though none of the directors had contracts of service with the company, and no resolution had ever been passed authorising them to receive the payments. The company went into liquidation and the liquidator made an application for repayment of the money. The court held that the payments were to be regarded as properly authorised because they had been made with the full knowledge and consent of all the shareholders. Buckley J explained: The broad principle has never been seriously questioned by the courts since. In Neuberger J stated: ==Requirements==

The application of the Duomatic principle contains two core requirements: ==Expansion==

In subsequent cases courts have expanded the general principle to also apply to a wider array of situations. • In it was affirmed that the principle applied to the ostensible authority of persons as well as to express authority. • In it was held that the consent of the beneficial owner of any shares would be sufficient if the trustee can be compelled to vote in accordance with the beneficial owner's wishes. But in it was clarified that where shares were held for more than one beneficial owner as joint owners, the assent of only one of the joint owners would not be sufficient. • In Runciman v Walter Runciman plc [1992] BCLC 1084 at 1092 and it was held that informal and unanimous consent of the board of directors is also effective as a resolution passed at a duly convened meeting. Prior to those cases there was doubt as to whether the principle would apply to directors because of their fiduciary duties to the company might preclude informal assent. • The principle has also been extended beyond company law to include committees of clubs which are unincorporated associations, see . ==Footnotes==