Shareholder Protection from Unfairly Prejudicial Conduct
At Gregg Latchams we have specialist expertise in shareholder protection and the protection of minority shareholders from the unfairly prejudicial conduct of the affairs of the company in which they are interested.
Section 994 to 996 in Part 30 of the Companies Act 2006 enables a shareholder in a company who is being treated in an ‘unfairly prejudicial’ way to seek relief from the court. Typically, these cases involve companies with relatively small numbers of shareholders. Those shareholders are usually also directors and may be the only directors of the company.
The shareholders/directors will generally have fallen out with each other. The unfairly prejudicial conduct often takes the form of an exclusion of one shareholder/director by another from the affairs of the company. On other occasions, it arises because of the misappropriation by one shareholder / director of property or funds belonging to the company or of a business opportunity that might have been enjoyed by the company. In other cases it might take the form of wrongful dealings with shares, improper dividends, salary or other payments or other improper conduct of the company’s affairs.
This legislation gives the court very wide powers to control the conduct of the affairs of the company and its shareholders / directors. Such proceedings regularly result in the court ordering that one shareholder / director should purchase the shares of another at a value determined by the court to be fair in the circumstances.
We work together with Counsel specialising in this area. One of those barristers is Andrew Marsden of Commercial Chambers, Bristol (www.commercialchambers.org). He has published a really useful guide to the the law and practice in this area and you can access or download a copy here.
Please contact Richard Gore to discuss any shareholder protection issues arising from this article.