The Proper Purpose Rule as a Constraint on Directors’ Autonomy – Eclairs Group Limited v JKX Oil & Gas Plc

Abstract

The recent decision of the United Kingdom Supreme Court in Eclairs Group Limited v JKX Oil & Gas plc highlights the pressures faced by company directors in change of control situations, in which they may be tempted to take action to prevent or discourage such change. The Supreme Court decision provides important clarity on the scope of the proper purpose rule in these (and other) situations. The authors explore the implications for the autonomy of directors in their decision making of different judicial interpretations of the proper purpose rule. They do this by focusing on the scope of the proper purpose rule, whether a subjective or objective test is employed in the application of the rule and the test for causation where a director is motivated by mixed purposes.