[BUG] Custom commands in parent directory `.claude/` not discovered after latest VSCode extension update

Preflight Checklist

• [x] I have searched existing issues and this hasn't been reported yet
• [x] This is a single bug report (please file separate reports for different bugs)
• [x] I am using the latest version of Claude Code

What's Wrong?

After updating to the latest Claude Code VSCode extension, custom commands stored in a parent directory's .claude/commands/ folder are no longer discovered or accessible.

What Should Happen?

Commands in a parent directory's .claude/commands/ should be discovered and available, as they were in the previous version. A separate VSCode window running the older extension version still discovers and shows these commands with the same file paths and project.

Error Messages/Logs

No error messages - commands simply don't appear in the available commands list.

Steps to Reproduce

1. Create a .claude/commands/ directory (e.g., ~/code/.claude/commands/)
2. Add command markdown files to that directory
3. Open Claude Code in the same directory (e.g., ~/code/) - commands ARE visible
4. Open Claude Code in a child directory (e.g., ~/code/my-project/) - commands are NOT visible

Directory structure:
~/code/
├── .claude/
│ └── commands/
│ └── my-commands/
│ ├── command-a.md
│ ├── command-b.md
│ └── ...
└── my-project/ <-- working directory

Claude Model

Opus

Is this a regression?

Yes, this worked in a previous version

Last Working Version

_No response_

Claude Code Version

2.1.12 (Claude Code)

Platform

Anthropic API

Operating System

macOS

Terminal/Shell

Terminal.app (macOS)

Additional Information

_No response_