TTM03810 | Qualifying companies and ships: Strategic management

Strategic management

The strategic management test displays features in common with the central management and control test for corporate residence, operating at a high level of decision making, including:

• decisions on significant capital expenditure and asset disposals (for example purchase and sale of ships),

• award of major contracts and other resource commitments,

• agreement on strategic alliances (for example shipping ‘conferences’ - see TTM15210 - and vessel pooling), and other strategic decisions, and

• direction of foreign establishments.

Possible factors include:

• location of headquarters, including senior management staff,

• location of company board meetings,

• location of operational board meetings,

• location of vessels' flag registries, and

• residence of directors and key employees.

Strategic management will be in the United Kingdom if the UK directors and key personnel have effective independent power to make strategic decisions, genuinely and not just formally: their power over the affairs of the company must not be delegated.

The directors and key personnel may need to take account of guidance from the parent company reflecting overall group policy but nevertheless must form an independent judgment on strategic management rather than merely acting as a rubber stamp for decisions made elsewhere. This means they form their own independent judgments as to strategy but where appropriate taking account of comments made by the parent company in relation to the objectives of the group as a whole.

Particular issues arise with a permanent establishment in the UK. To satisfy the strategic management test it would be necessary to demonstrate that the business of the establishment was strategically managed in the UK, distinctly from the other affairs of the company. Ultimately this is a factual question based on evidence.

The situs of strategic-level management is thus a question of fact and while, as recognised in company residence case law the place of board meetings is an important factor, the answer to the question is subtle and depends on all the surrounding circumstances. It follows that if the arrangements for board meetings are disrupted by an international emergency, the answer to the place of management question does not change by virtue of that circumstance alone.

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