Unfair Prejudice Of Shareholders Under The Companies Act 2006

A recent decision has highlighted areas of potential exposure

to, amongst others, shareholders, and also to directors and

officers and their D&O insurers.

The case concerned improper attempts by a significant

shareholder in a company to assert control over the company. The

court held that this can amount to conduct which is unfairly

prejudicial to the interests of the members of the company, or to

some of the members. Further, the court may, in appropriate

circumstances, order the shareholder who has caused the prejudice

to sell his shareholding to the member who brings the petition. A

recent decision has highlighted areas of potential exposure to,

amongst others, shareholders, and also to directors and officers

and their D&O insurers.

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Full Article

A recent decision has highlighted areas of potential exposure

to, amongst others, shareholders, and also to directors and

officers and their D&O insurers.

The case concerned improper attempts by a significant

shareholder in a company to assert control over the company. The

court held that this can amount to conduct which is unfairly

prejudicial to the interests of the members of the company, or to

some of the members. Further, the court may, in appropriate

circumstances, order the shareholder who has caused the prejudice

to sell his shareholding to the member who brings the petition.

In a recent decision, the court was faced with a relationship

between two shareholders, in a jointly-owned company which had

completely broken down. The petitioner was a venture capital fund

that had invested in a private company founded by an entrepreneur.

Under the terms of the investment, a new CEO and COO approved by

the fund were appointed as additional directors, and the

entrepreneur became Chief Technical Officer with primary

responsibility for R&D and for protecting the company's

intellectual property. It was submitted in evidence that the

entrepreneur found it difficult to accept that he "no longer

had overall management control of the company as part of his

employment responsibilities".

When relations broke down, and the entrepreneur sought to take

control of the company at board level, the fund brought a petition

under s.994 of the Companies Act 2006 alleging that the conduct of

the entrepreneur amounted to unfair prejudice. The court

categorised the relationship between the two shareholders as a

"quasi partnership": a relationship based on mutual trust

and...