''Ebrahimi v Westbourne Galleries Ltd'' 973AC 360 is a United Kingdom company law case on the rights of minority

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 ...

s. The case was decided in the

House of Lords The House of Lords, also known as the House of Peers, is the Bicameralism, upper house of the Parliament of the United Kingdom. Membership is by Life peer, appointment, Hereditary peer, heredity or Lords Spiritual, official function. Like the ...

Facts

Mr Ebrahimi and Mr Nazar were partners. They decided to incorporate as the business was highly successful, buying and selling expensive rugs. Their store was originally in Nottingham, and then moved to London at 220

Westbourne Grove Westbourne Grove is a retail road running across Notting Hill, an area of west London. Its western end is in the Royal Borough of Kensington and Chelsea and its eastern end is in the City of Westminster; it runs from Kensington Park Road in the ...

. Mr Ebrahimi and Mr Nazar were the sole shareholders in the company. All profits were paid as directorial compensation. No dividends were ever issued. A few years later, when Mr Nazar's son came of age, he was appointed to the board of directors and Mr Ebrahimi and Mr Nazar both transferred shares to him. After a falling out between the directors Mr Nazar and son called a company meeting, at which they passed an ordinary resolution to have Mr Ebrahimi removed as a director. Mr Ebrahimi, clearly unhappy at this, applied to the court for a remedy to have the company wound up.

Judgment

The House of Lords stated that as a company is a separate legal person, the court would not normally entertain such an application. However, they believed that as the company was so similar in its operation as it was when it was a

partnership A partnership is an arrangement where parties, known as business partners, agree to cooperate to advance their mutual interests. The partners in a partnership may be individuals, businesses, interest-based organizations, schools, governments o ...

, they created what is now known as a quasi-partnership. Mr Ebrahimi had a legitimate expectation that his management function would continue and that the articles would not be used against him in this way. Based on the personal relationship between the parties it would be inequitable to allow Mr Nazar and his son to use their rights against Mr Ebrahimi so as to force him out of the company and so it was just and equitable to wind it up. The company was wound up and Mr Ebrahimi received his capital interest. Lord Wilberforce gave the following judgment.

Significance

Soon after the remedy for

unfair prejudice Unfair prejudice in United Kingdom, company law is a statutory form of action that may be brought by aggrieved shareholders against their company. Under the Companies Act 2006 the relevant provision is s 994, the identical successor to s 459 Compa ...

was introduced, which allows a court to simply order a minority shareholder to be bought out, rather than a company being wound up. This is found in 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 ...

sections 994 to 996.

External links

*Robert Yalden,
Business organizations: principles, policies and practice
', 2008, Emond Montgomery Publication. pp931–9. {{UK law United Kingdom company case law Lord Wilberforce cases House of Lords cases 1972 in British law 1972 in case law

Facts

Judgment

Significance

See also

External links