The limits of assent of the Duomatic Principle: consent must be clear

In Fang Ankong & another v Green Elite Ltd (in liquidation) (Virgin Islands) [2025] UKPC 47, the Privy Council considered whether an informal understanding between shareholders was enough to authorise substantial distributions from a company. The decision provides important guidance on the scope of the Duomatic principle and serves as a reminder that informal approval will only be effective where there is clear, informed and unanimous consent to the specific transaction in question.

What is the Duomatic principle?

The Duomatic principle originates from Re Duomatic Ltd [1969] 2 Ch 365. It allows a company to be bound by the unanimous informal consent of all shareholders, as if the consent were given by a formal resolution, provided:

• all shareholders with voting rights agreed;
• shareholders had full knowledge of what was being approved; and
• the matter was within the company’s powers.

Ankong v Green Elite Ltd – the facts:

Ankong v Green Elite Ltd was a British Virgin Islands (BVI) company established to operate an employee share benefit arrangement for three director-shareholders. After the company sold its principal asset, substantial sums were distributed to those individuals without formal shareholder or board approval. When the company later entered liquidation, the liquidators challenged the payments. They argued that the distributions breached directors’ duties and had not been properly authorised.

The directors contended that all shareholders understood the purpose of the company and that there was an informal understanding that the sale proceeds would ultimately benefit the director-employees. They argued this amounted to effective approval under the Duomatic principle.

The Judge at first instance rejected the Duomatic defence, held that the directors were in breach of duty and ordered that the directors were liable to account to the Company for the improperly distributed funds.

The Court of Appeal’s approach

The Defendants appealed to the Eastern Caribbean Court of Appeal on the grounds that Duomatic had been misapplied and that the payments were consistent with the Company’s purpose and the commercial understanding between those that had set up the Company.

The Eastern Caribbean Court of Appeal rejected that argument. It found that the alleged understanding between the shareholders was insufficiently specific to demonstrate informed approval of the actual transactions that occurred. Important details of the distributions had never been agreed and there was no clear evidence that the shareholders had consented to the payments that were ultimately made.

What did the Privy Council decide?

 The Privy Council agreed with the outcome of the Court of Appeal’s decision but clarified an important point of principle. It rejected the suggestion that Duomatic assent should be analysed in the same way as a contractual agreement. The Privy Council confirmed that:

• Duomatic consent is not founded on contract;
• it does not require all of the elements needed to create a legally binding contract; and
• the real question is whether there is objective evidence of unanimous shareholder consent to the specific transaction.

Although the legal analysis was refined, the Privy Council concluded that the shareholders had not provided sufficiently clear, informed and unanimous consent to the distributions in question. General agreement about the purpose of the company was not enough.

Practical lessons for directors and shareholders

Ankong v Green Elite clarifies that the Duomatic principle is not a “catch-all” for directors to assume informal shareholder support.

There must be actual, unanimous consent covering the specific transaction, not just agreement on general company purpose.

Whilst the Privy Council’s decision is not strictly binding on the English courts, it has strong persuasive value in English and other common law jurisdictions on how Duomatic should be applied.

How we can help

The Cripps commercial dispute resolution and restructuring & insolvency team can help insolvency practitioners, companies and individuals on a variety of contentious insolvency matters at a local and national level. We can help review the background of the dispute and identify the most effective way forward.