The Role of Warranties and Indemnities in Protecting Buyers in Acquisitions
When purchasing a business/shares, buyers want assurance that they will be getting what they pay...
Litigation and Dispute Resolution
The recent case of Re Macom GmbH (UK) Ltd [2021] EWHC 1661 (Ch) highlights the wide discretion of the court when considering unfair prejudice. Even when a court decides that a party’s conduct constitutes unfair prejudice, it does not always order a share buyout.
Facts
The petitioner (“P”) in this case was a German company and a majority shareholder (60%) in Macom GmbH (UK) Limited (“Macom UK”). Mr Bozeat (”Mr B”) and his wife together held the remaining 40% of the shares.
The parties entered into a shareholders’ agreement. Under the terms of that agreement, P appointed Mr Kottke (“Mr K”) as a director of Macom UK, the idea being that Mr K and Mr B would operate Macom UK together, with Mr K keeping an eye on P’s interests in the UK.
Mr K and Mr B could not work together. The relationship broke down.
P presented a petition, alleging that Mr B had (1) received unauthorised dividend payments; (2) excluded Mr K from management and governance; (3) breached the shareholders’ agreement: (4) failed to provide information to which P was entitled; and (5) made unauthorised disclosures of confidential information to his father with whom the petitioner had a connection – all of which had unfairly prejudiced P.
P asked the court to order that Mr and Mrs B buy out its shares.
Held
The court agreed that Mr B had acted unfairly and in a way that prejudiced P.
However, it held that the unauthorised dividend declarations were not unfairly prejudicial because they resulted in no long term financial loss to the company. Mr B was entitled to those dividends under the terms of the shareholders’ agreement – he just received payment earlier than usual.
The court made an order regulating the future conduct of Macom UK’s affairs and requiring the parties to comply with the provisions of the shareholders’ agreement.
Key takeaways
What can we learn from this recent case?
If you have concerns about the conduct of fellow shareholders and/or directors then contact our corporate disputes solicitors George Gwynn or Morgan Rees to seek specialist advice on the options available to you.
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