United Kingdom, company law
United may refer to:
Places
* United, Pennsylvania, an unincorporated community
* United, West Virginia, an unincorporated community
Arts and entertainment Films
* ''United'' (2003 film), a Norwegian film
* ''United'' (2011 film), a BBC Two fi ...
is a statutory form of action that may be brought by aggrieved shareholders against their company. Under the
Companies Act 2006
The Companies Act 2006 (c 46) is an Act of the Parliament of the United Kingdom which forms the primary source of UK company law.
The Act was brought into force in stages, with the final provision being commenced on 1 October 2009. It largely ...
the relevant provision is s 994, the identical successor to s 459
Companies Act 1985
The Companies Act 1985 (c. 6) is an Act of the Parliament of the United Kingdom of Great Britain and Northern Ireland, enacted in 1985, which enabled companies to be formed by registration, and set out the responsibilities of companies, their ...
. Unfair prejudice actions have generated an enormous body of cases, many of which are called "Re A Company", with only a six-digit number and report citation to distinguish them. They have become a substitute for the more restrictive conditions on a "derivative action", as an exception to the rule in ''
Foss v Harbottle
''Foss v Harbottle'' (1843) 2 Hare 46167 ER 189is a leading English precedent in corporate law. In any action in which a wrong is alleged to have been done to a company, the proper claimant is the company itself. This is known as "the proper pl ...
''. Though not restricted in such a way, unfair prejudice claims are primarily brought in smaller, non-public companies. This is the text from the Act.
Four main issues arise out of the interpretation of s.994. First of all, who has a right to complain against whom? Secondly, what specifically does the "company's affairs" mean in s.994(1)(a)? Thirdly, when is something "unfair" and at the same time "prejudicial"? And lastly, when it says "the interests of members", what counts as an "interest" of a "member"? The defining feature of the s.994 action is that it is completely vague. Courts were therefore capable of interpreting the provisions gradually as they felt would be fair. After hearing a case, a court may make "such order as it thinks fit" under s.996. This wide discretion means that previous case law is not as weighty in
precedent
A precedent is a principle or rule established in a previous legal case that is either binding on or persuasive for a court or other tribunal when deciding subsequent cases with similar issues or facts. Common-law legal systems place great valu ...
, as in other areas of law, since each case will be decided on its particular facts.
"'Unfairly prejudicial' is deliberately imprecise language which was chosen by Parliament because its earlier attempt in s. 210 of the Companies Act 1948 to provide a similar remedy had been too restrictively construed. The earlier section had used the word 'oppressive', which the House of Lords in '' Scottish Co-operative Wholesale Society v. Meyer''
959
Year 959 ( CMLIX) was a common year starting on Saturday (link will display the full calendar) of the Julian calendar.
Events
By place
Byzantine Empire
* April - May – The Byzantines refuse to pay the yearly tribute. A Hungari ...
AC 324 said meant 'burdensome, harsh and wrongful'. This gave rise to some uncertainty whether ' wrongful' required actual illegality or invasion of legal rights. The
Jenkins Committee on Company Law
The Jenkins Committee on Company Law was a Company Law Committee, chaired by Lord Jenkins and formed under the tenure of John Rodgers (Parliamentary Secretary to the Board of Trade). It was formed in November 1959 with terms of reference ''To rev ...
, which reported in 1962, thought that it should not. To make this clear, it recommended the use of the term 'unfairly prejudicial', which Parliament somewhat tardily adopted in s. 75 of the Companies Act 1980. This section is reproduced (with minor amendment) in the present s. 459 of the Companies Act 1985."
Hence the unfair prejudice remedy was introduced as an implicit instruction to the courts to liberalise and broaden the law to allow for more petitions by minority shareholders.
Right to complain
To bring an action, one must be a member (a
shareholder
A shareholder (in the United States often referred to as stockholder) of a corporation is an individual or legal entity (such as another corporation, a body politic, a trust or partnership) that is registered by the corporation as the legal own ...
) of the company one complains against (this is defined by s.112
Companies Act 2006
The Companies Act 2006 (c 46) is an Act of the Parliament of the United Kingdom which forms the primary source of UK company law.
The Act was brought into force in stages, with the final provision being commenced on 1 October 2009. It largely ...
, the source of all sections hereafter, unless otherwise stated), or a number of members so long as they do not together hold a majority of votes. If they did hold a majority of votes, then they would be able to control the company and should not be relying on court to sort out their problems. Also, able to bring actions are shareholder nominees, those "transmitted" shares by operation of law (s.994(2)), those transferred shares without yet having been registered as members and the Secretary of State (s.995). Shareholders may assert conduct was unfairly prejudicial even if it was before they joined the company and they may claim against a person who has already sold their shares (so the wrongdoer cannot escape). But once a claimant shareholder has sold his own shares and is no longer a member, no claim may be brought.
Unlike cases under
trust law
A trust is a legal relationship in which the holder of a right gives it to another person or entity who must keep and use it solely for another's benefit. In the Anglo-American common law, the party who entrusts the right is known as the "settl ...
, there is no equivalent
maxim
Maxim or Maksim may refer to:
Entertainment
* ''Maxim'' (magazine), an international men's magazine
** ''Maxim'' (Australia), the Australian edition
** ''Maxim'' (India), the Indian edition
*Maxim Radio, ''Maxim'' magazine's radio channel on Sir ...
that "he who comes to equity must come with clean hands" (because it does not say it in the statute). But it will be highly relevant how honourably a claimant may have acted to whether the relief should be granted. Sometimes unfair prejudice claims reveal a tangled history of "she did that, so I did this, and then she..." where it may prove difficult to discern who was really worse. Several cases have held that the controllers of a company may not use corporate assets to fight their side.
*'' Atlasview Ltd v Brightview Ltd'' 004EWHC 1056 (Ch), rejecting that a claim involving
reflective loss
In United Kingdom company law, reflective loss is the loss of individual shareholders that is inseparable from general loss of the corporation, company. The rule against recovery of reflective loss states that there should be no double recovery, so ...
959
Year 959 ( CMLIX) was a common year starting on Saturday (link will display the full calendar) of the Julian calendar.
Events
By place
Byzantine Empire
* April - May – The Byzantines refuse to pay the yearly tribute. A Hungari ...
985
Year 985 ( CMLXXXV) was a common year starting on Thursday (link will display the full calendar) of the Julian calendar.
Events
By place
Europe
* Summer – Henry II (the Wrangler) is restored as duke of Bavaria by Empress Theoph ...
BCLC 11, per Goulding J
*'' Re Elgindata Ltd'' 991BCLC 959, per Warner J
*''
Re Macro (Ipswich) Ltd
Re or RE may refer to:
Geography
* Re, Norway, a former municipality in Vestfold county, Norway
* Re, Vestland, a village in Gloppen municipality, Vestland county, Norway
* Re, Piedmont, an Italian municipality
* Île de Ré, an island off the we ...
''
994
Year 994 ( CMXCIV) was a common year starting on Monday (link will display the full calendar) of the Julian calendar.
Events
By place
Byzantine Empire
* September 15 – Battle of the Orontes: Fatimid forces, under Turkish gener ...
995
Year 995 ( CMXCV) was a common year starting on Tuesday (link will display the full calendar) of the Julian calendar.
Events
By place
Japan
* 17 May - Fujiwara no Michitaka (imperial regent) dies.
* 3 June: Fujiwara no Michikane gain ...
Vinelott J
Sir John Evelyn Vincent Vinelott (15 October 1923 – 22 May 2006) was a leading barrister at the Chancery bar and an English High Court judge in the Chancery Division from 1978 to 1994.
He was born in Gillingham, Kent, and studied at Queen E ...
999 999 or triple nine most often refers to:
* 999 (emergency telephone number), a telephone number for the emergency services in several countries
* 999 (number), an integer
* AD 999, a year
* 999 BC, a year
Books
* ''999'' (anthology) or ''999: T ...
The typical award made is for a minority shareholder's shares to be purchased at a fair value.
*''Fulham Football Club (1987) Ltd v Richards'' [2011] EWCA Civ 855, an unfair prejudice petition was stayed under the Arbitration Act 1996 s 9, given that the dispute was covered by an arbitration agreement.
Reform proposals
The Company Law Review decided that it would not update the unfair prejudice provisions for the
Companies Act 2006
The Companies Act 2006 (c 46) is an Act of the Parliament of the United Kingdom which forms the primary source of UK company law.
The Act was brought into force in stages, with the final provision being commenced on 1 October 2009. It largely ...
. It had examined various proposals that the Law Commission had made, but was unenthusiastic. A salient feature of the action is the sheer volume of cases brought, often with long complicated histories, as shareholders dig into the dirt of the past, with which to bring evidence of "unfair prejudice". Active case management has been one solution being pursued, since the
Civil Procedure Rules 1998
The Civil Procedure Rules (CPR) were introduced in 1997 as per the Civil Procedure Act 1997 by the Civil Procedure Rule Committee and are the rules of civil procedure used by the Court of Appeal, High Court of Justice, and County Courts in civil ...
.see ''Re Rotadata Ltd''
000
Triple zero, Triple Zero, Zero Zero Zero, Triple 0, Triple-0, 000, or 0-0-0 may refer to:
* 000 (emergency telephone number), the Australian emergency telephone number
* "Triple Zero", a song by AFI (band), AFI from ''Shut Your Mouth and Open Your ...
1 BCLC 122 The others included,
*imposing a time limit for bringing claims
*prohibiting advertising of unfair prejudice proceedings without court leave
*promoting 'shareholder exit' articles in constitutions, so that a remedy for a shareholder to leave a company where the relationships have soured are built into a company's own regulations
*adding a winding up remedy to those available already. This is already available under the
Insolvency Act 1986
The Insolvency Act 1986c 45 is an Act of the Parliament of the United Kingdom that provides the legal platform for all matters relating to personal and corporate insolvency in the UK.
History
The Insolvency Act 1986 followed the publication and ...
, s 122(1)(g) where it is found "just and equitable" to do so. Confusingly, cases have not granted unfair prejudice relief but have allowed winding up on this basis, so it became a habit for claims to ask for both, either/or. This was ended by the ''Practice Direction''
999 999 or triple nine most often refers to:
* 999 (emergency telephone number), a telephone number for the emergency services in several countries
* 999 (number), an integer
* AD 999, a year
* 999 BC, a year
Books
* ''999'' (anthology) or ''999: T ...
BCC 741, para 9 demanding petitioners to seek winding up only where it is genuinely considered appropriate and to consent to a standard form interim order to allow the company to continue to trade
*most importantly, since the majority of resulting orders are 'buy outs', putting such a remedy on a statutory footing, where a private company member has at least 10% of the shares, and has been excluded from management. There would be a presumption that exclusion from management would be unfairly prejudicial.
The Company Law Review explicitly rejected the last two ideas.
See also
*
UK company law
The United Kingdom company law regulates corporations formed under the Companies Act 2006. Also governed by the Insolvency Act 1986, the UK Corporate Governance Code, European Union Directives and court cases, the company is the primary legal ...
*
Derivative claim A shareholder derivative suit is a lawsuit brought by a shareholder on behalf of a corporation against a third party. Often, the third party is an insider of the corporation, such as an executive officer or director. Shareholder derivative suits a ...
*''
Foss v Harbottle
''Foss v Harbottle'' (1843) 2 Hare 46167 ER 189is a leading English precedent in corporate law. In any action in which a wrong is alleged to have been done to a company, the proper claimant is the company itself. This is known as "the proper pl ...
'' (1843) 2 Hare 461, 67 ER 189
*'' Boughtwood v Oak Investment Partnership XII, Ltd Partnership'' EWCA_Civ_23 *US_corporate_law.html" ;"title="010 EWCA Civ 23 *US corporate law">010 EWCA Civ 23 *US corporate law
*New York Business Corporation Law section 1104-a, the holders of 20 per cent of voting shares of a non-public corporation may request that the corporation be wound up on grounds of oppression.
*''Donahue v. Rodd Electrotype Co of New England'' 367 Mass 578 (1975) majority shareholders cannot authorise a share purchase from one shareholder when the same opportunity is not offered to the minority.
*'' In re Judicial Dissolution of Kemp & Beatley, Inc'' 64 NY 2d 63 (1984) under a "just and equitable winding up" provision, (equivalent to IA 1986 s 212(1)(g), it was construed that less drastic remedies were available to the court before winding up, and "oppression" was said to mean ‘conduct that substantially defeats the ‘reasonable expectations’ held by minority shareholders in committing their capital to the particular enterprise. A shareholder who reasonably expected that ownership in the corporation would entitle him or her to a job, a share of corporate earnings, a place in corporate management, or some other form of security, would oppressed in a very real sense when others in the corporation seek to defeat those expectations and there exists no effective means of salvaging the investment.’
*'' Meiselman v. Meiselman'' 309 NC 279 (1983) a shareholder’s ‘reasonable expectations’ are to be determined by looking at the whole history of the participants’ relationship. ‘That history will include the ‘reasonable expectations’ created at the inception of the participants’ relationship; those ‘reasonable expectations’ as altered over time; and the ‘reasonable expectations’ which develop as the participants engage in a course of dealing in conducting the affairs of the corporation.’