In our last article on unfair prejudice petitions, we covered what exactly the petitions are, who can bring a petition for unfair prejudice and what the test is to demonstrate unfair prejudice. In this article, we will examine the remedies available to a petitioner in the event that their claim for unfair prejudice is successful.
Section 996 of the Companies Act 2006 sets out the kind of orders that the court can be expected to make in the event that a petitioner is successful in their claim for unfair prejudice. However, it is important to note that the court retains the discretion to make any order it sees fit as the court will generally be hesitant to interfere with commercial decisions with regard to the general operation of the company.
Section 996(2) provides that the court may make an order that:
- The conduct of the company’s affairs shall be regulated in future.
- The company shall be prevented from doing or continuing to act in a way that has been petitioned against. Alternatively, the company shall be ordered to do an act that the petitioner has omitted to do and complained of.
- Require the company not to make any (or any specified) alterations to the articles of association without permission of the court.
- Authorise civil proceedings to be brought in the name of and on behalf of the company by such persons and on such terms as the court may direct.
- The shares of any members of the company shall be purchased by other members or alternatively by the company itself. In the case of the purchase by the company itself, the reduction of the company’s capital accordingly.
Generally speaking, the most common form of remedy that is awarded in unfair prejudice petitions in the event of a successful claim is that the shares of the petitioner shall be purchased by those members causing the unfair prejudice.
Shareholder remedies do extend to remedies available under The Insolvency Act 1986 for “just and equitable winding up” and derivative actions under Sections 260 to 264 of the Companies Act 2006.
Are there any bars to relief?
In short, yes. The court can be dissuaded from granting a particular remedy in light of the petitioners’ own conduct, or the facts generally of the case.
For example, if a petitioner refuses a fair offer to purchase their shares from the other members complained of, the court may be dissuaded from granting relief that their shares should be purchased by those members at trial. Similarly, if the petitioner is also found to have committed misconduct, this could prevent the court from granting relief as “two wrongs don’t make a right”.
As to what is deemed to be a fair and reasonable offer is weighed on the facts of the case. However, expert evidence from a suitably qualified accountant as to the fair value of the petitioning members shares can sometimes be valuable in determining early on whether any offer made is fair and reasonable.
Alternatively, if there is provision in the company’s articles of shareholders agreement providing for an exit route, the court may be persuaded to follow that method given that it was in contemplation of the parties at the time in which the documents were created.
If the petitioner unduly delays presenting their petition, this may also weigh on the court’s decision in granting relief. Delay can often be taken to be acceptance of the alleged unfairly prejudicial conduct by the petitioner, and so it is advised to seek advice on any suspected unfairly prejudicial conduct swiftly to absolve the risk of delay being a bar to relief.
I think I have a claim for unfair prejudice, how can Stephensons help me?
The corporate team at Stephensons are experienced in bringing claims for unfair prejudice. We can assist you with advising on your legal position, and the potential remedies that may be available to you. The team work with a range of experts who can aid in providing a detailed analysis of what exactly your shares may be worth.
The team have been successful in obtaining several positive outcomes for clients in recent years regarding unfair prejudice claims, the majority of which have been obtained without the need for costly and time-consuming litigation. Read our recent case study for further information on how we are able to help with unfair prejudice claims. If you require advice or assistance call us today on 0161 696 6170 to see how we can help.
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