5 July 2019 by

Shareholders: How to protect your rights in decision making

As a shareholder of a company, have you ever felt that the majority are making decisions which are unfairly prejudicial to your interest in the company?

When shareholders hold different quantities of shares in a company, an imbalance of voting power can exist. In some instances, this can result in the majority conducting the company’s business or acting in a way which is prejudicial to your interest as a minority shareholder.

The Companies Act 2006 (the “Act”) provides mechanisms for a shareholder, in this situation, to protect their interest, by making a petition to the court for an order to grant relief from unfair prejudice.

Under sections 994-996 of the Act, a shareholder may apply to the court on the ground that:

  • the company’s affairs are being or have been conducted in a manner that is unfairly prejudicial to the interests of shareholders generally or of some part of its shareholding (including at least himself), or
  • an actual or proposed act or omission of the company (including an act or omission on its behalf) is or would be so prejudicial.

If the petition succeeds, the court has the freedom to grant an order for relief from the unfair prejudice; this could include but is not limited to:

  • regulating a company’s conduct,
  • requiring the company to act or refrain from acting in a specific way, so as to balance the matter complained of, or
  • order the majority shareholders to purchase the shares of the minority for a fair value.

If, however, the majority shareholders can show any misconduct on the part of the minority shareholder, or provide evidence that a fair offer has been made by them to purchase the shares of the minority, then the unfair prejudice claim could be contested or struck out.

A recent case in the Court of Appeal was asked to determine whether the offers made by the majority shareholder and the rejection of them by the minority shareholder were reasonable. If you would like to read more about this case, please click here to read our blog.

28 June 2019 by

Why not include a charity in your Will?

Many charities rely heavily on funding from legacies left in Wills. Sometimes these legacies are disputed by family members or […]

4 July 2019 by

When is an offer to purchase shares a defence to an unfair prejudice claim

The recent Court of Appeal case of  Re: Sprintroom Ltd Prescott v Potamianos and anor  has provided further insight into […]

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