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
Just because a shareholder doesn’t like how the company is being managed doesn’t mean the court will make a finding of unfair prejudice.
In Primekings Holding Limited v Anthony King [2021] EWCA Civ 1943 the Court of Appeal emphasised that a shareholder bringing a petition must prove a “causal connection” between the personal actions complained of and the prejudicial conduct of the company’s affairs.
Background
An unfair prejudice petition is a petition which a shareholder of a company can present to the court alleging that the company’s affairs are being or will be conducted in a manner that is unfairly prejudicial to the interests of the shareholders.
If the court makes a finding of unfair prejudice, it has a wide discretion to make a number of orders, including a share purchase order. You can read more about the court’s discretion here.
This case was part of a complex dispute concerning Kings Solutions Group Limited. The respondents to an unfair prejudice petition applied to strike out certain allegations in the petition on the basis that those allegations did not constitute “affairs of the company”.
There were a number of allegations in question but the key ones were allegations against the respondents conduct in separate litigation in which the respondents had sought, obtained and enforced a charging order over the petitioner’s shares. There was no specific allegation that Primekings funds were used to support that litigation.
The court struck out the relevant paragraphs of the petition and found they included conduct which was not relevant to the affairs of the company.
The court explained that the legislation states that the acts complained of must either (i) be an act or omission of the company, or (ii) be conduct of the company's affairs rather than acts done in the conduct of a shareholder's personal affairs.
Practical implications
Practically speaking, this means:
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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