Earlier this year, the ICSA Chartered Secretary Magazine featured a story about a shareholder who was forced to return dividends by the Serious Fraud Office, a case which sheds light on the importance of lawful conduct with respect to shareholders, reports company secretary support firm London Registrars (https://www.london-registrars.co.uk/).
The Serious Fraud Office obtained a High Court Order under Section 5 of the Proceeds of Crime Act 2002 instructing engineering firm Mabey Engineering (Holdings) Ltd to pay back £131,000 worth of dividends it received from its subsidiary company Mabey and Johnson. Mabey and Johnson were found guilty of corruption and breaking UN sanctions with regards to contracts the company secured in Iraq in order to construct bridges. The Chief Executive of the Serious Fraud Office, Richard Alderman, commented that this was a breakthrough case which meant that the Serious Fraud Office can now pursue individual investors who have received dividends from companies convicted of unlawful conduct, even if the shareholder was unaware of the fraud. The Serious Fraud Office is also now free to recover the related funds.
Mr Alderman said that the Serious Fraud Office will “pursue this approach vigorously….shareholders and investors in companies are obliged to satisfy themselves with the business practices of the companies they invest in. It is particularly so for institutional investors who have the knowledge and expertise to do it, he continued. The SFO intends to use the civil recovery process to pursue investors who have benefitted from illegal activity. Where issues arise, we will be much less sympathetic to institutional investors whose due diligence has clearly been lax in this respect.”