Unfair prejudice remedy

s.994 allows a member to petition the court for a remedy where

The company's affairs are being or have been conducted in a manner that is unfairly prejudicial to the interests of the members generally or some part of its members

Act actual or proposed act or omission of the company is or would be o prejudicial

Any person who is a member of the company may petition the court, former members cannot petition the court

Non-members may also petition the court

A person who is not a member may petition the court if shares have been transferred or transmitted to him by the operation of law

The Secretary of State may bring a petition in certain circumstances

Who may a petition be brought against?

s.994(a) applies where the company' affairs ar for have been conducted in a manner that is unfairly prejudicial - this can be based on the actions of a wide variety of persons, including the company, the directors, other members or third parties

s.994(b) applies where an actual or opposed act or omission of the company is or would be unfairly prejudicial - the courts have held that the petitioner must identify something which the company does or fails to do

A member of a parent company can bring a s.994 petition in relation to its subsidiary or vice versa

In order for a s.994 petition to succeed the petitioner must show that the conduct complained of is both unfair and prejudicil

Examples of conduct that have been held to amount to unfairly prejudicial conduct

Abuse of a controlling position

Selling company assets at an undervalue to another company they control

Transferring business to another company they control

Paying themselves excessive remuneration

Mismanegment of the company will not normally constitute unfair prejudice but serious mismanagement can do

A breach of directors duties

A breach of the company's constitution or statutory rights

Criminal condut

A failure to consider paying dividend

Refusing to pay a declared dividend

A members interests are wider than his rights

Member qua member

A s.994 petition will only succeed if it is the petitioners interests as a member than have been unfairly prjudiced

The member must bring his claim in his capacity as a member and not in any other capactiy

Equitable considerations

In certain companies, rear must be had to equitable considerations when determining if the petitioners interests as a member have been unfairly prejudicied

Equitable considerations often involve a fundamental understanding between the shareholders which formed the basis of their association but was not put into contractual forms

It would appear that equitable considerations will only likely arise in a quasi-partnership company

Cases involving quasi partnership companies have largely involved a petitioner who has been excluded from managing the company and has alleged that this exclusion constitutes unfairly prejudicial conduct

This will only be the case if the expectation to manage is legitimate and was actually agreed upon

Remedie

If the court is satisfied that the s.994 petition is well founded, it may such order as it thinks fit for giving relief

The petitioner must specify the remedy he seeks, the court is not bound to provide this remedy

The court may deny the petitioner a remedy where a substantial period has elapsed between the unfairly prejudicial conduct and the petition being brought

S.996 provides a non-exhaustive list of remedies that can be awarded

An order regulating the conduct of the company's affairs in the future

An order requiring the company to refrain from doing an act complained or to perform an act that it has failed to perform

An order authorising civil proceedings to be brought in the name and on behalf of the company

An order requiring the company not to make alterations in its articles without the leave of the court

An order providing for the purchase of the shares of any members of the company by other members or by the company itself

Share purchase orders

A share purchase order under which the court orders that the respondent buys the shares of the petitioner, is the usual remedy

The court may also order that the company buys the petitioners share or that the respondent must sell his shares to the petitioner

Where a share purchase order is made, a key issue is at what price the shares must be pruchased

Given s.994 petitioners are minority shareholders, one key issued is whether the share price should be discounted to reflect the minority shareholders lack of control

Another key issue is at what date should the shares be valued