Unfair Prejudice And Beneficial Shareholders: A Confused Noise

While the position regarding the standing of struck off companies in BVI is relatively clear (see last year's English Commercial Court decision of Maritime Investment Holdings Inc v Underwriting Members of Syndicate 1183 Lloyd's and Others, the question as to the standing of another class of litigant, one who holds the beneficial - but not legal - ownership of shares in a BVI company, and who wishes to enforce his rights as a shareholder, remains a matter of debate.

There are several circumstances in which a beneficial owner of shares may wish to bring an action for unfair prejudice without the participation of the legal owner of his shares. These include where the legal shareholder holds shares both for his own benefit and on trust for others, as often seen in family companies; or where a nominee is the legal shareholder for numerous different beneficial owners who may have competing interests.

Headstart Class F Holdings Ltd and another v Y2K Finance Inc BVIHCV 278 of 2007; Citco Global Custody NV v Y2K Finance Inc HCVAP 22 of 2008

In Headstart Class F Holdings Ltd and another v Y2K Finance Inc (BVIHCV 278 of 2007), the claimant, Headstart, brought an unfair prejudice claim in relation to shares registered in the name Citco. Headstart said that it was the beneficial owner of the shares and Citco was its nominee. Citco was joined to the proceedings, and the defendant, Y2K, applied to strike out the claim on the basis that there was no evidence of the nominee/beneficiary relationship, so Headstart did not have standing.

The judge at first instance considered the English case of Atlas Ltd & ors v Brightview & ors [2004] BCC 542, and found that s184I permits "applications made by both nominee shareholders and beneficial owners of shares".1 She went on to conclude, however, that (i) the claimants had not adduced sufficient evidence to prove the nominee/beneficiary relationship, so Headstart had to be struck out of the claim, and (ii) such of the claim that remained after Headstart was struck from the claim did not amount to an allegation of unfair prejudice by Citco.

On appeal by Citco (Headstart was not a party to the appeal), the Court of Appeal noted that the judge at first instance concluded "that section 184I of the BVI Business Companies Act can be interpreted to include applications made by both nominee shareholders and beneficial owners of shares",2 though it did not express any view on this or refer to the decision in Atlas.3 The Court...

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