Please enable JavaScript.
Coggle requires JavaScript to display documents.
Unfair Prejudice - Coggle Diagram
Unfair Prejudice
Remedies available
If the courts find in favour of a complaint and agree that unfair prejudice has occurred, the Act sets out several remedies available to the court, in addition to a general provision to make any order it deems appropriate
-
Require the company to refrain from or continuing an act complained of, or to do an act which is has omitted to do
Authorise civil proceedings to be brought in the name of and on behalf of the company by such persons and on such terms as the court may direct
Require the company not to make any or any specified alternations to the Articles without the leave of the court
Provide for the purchase of shares of any members of the company by other members or by the company itself and in the case of the purchase by the company itself, and in the case of the purchase by the company itself the reduction of the company's capital accordingly
The power to authorise civil proceedings subject to terms directed by the court can be a particuarly useful remedy for the complainant as it not only enables an action to be pursued by the company but also means the costs of the action will be borne by the company
The most common remedy is to order that the shares held by the members whose inteests have been prejudiced be purchased by those who caused the unfair prejudice
Ordering that shares be purchased can cause considerable problems as there are many conflicting methods of valuation. Although the court will not necessarily stipulate the valuation method to be used they will often oblige the valuer to value the company at the date the prejudice initially took place and on the basis that the prejudicial conduct had not taken place
-
Examples
-
-
The diversion of business to another company in which the majority shareholders/directors are interested
Failure to observe properly or at all, rights of pre-emption on the allotment of shares thus denying an existing member from participating in a share issue thus their holding being diluted
Abuses of power of the articles, eg not circulating accounts etc
What is unfair conduct?
Conduct may be unfair even in circumstances where there has been no bad faith or the intention to be unfair or prejudicial
The test is objective and there is no need to show that anybody acted in bad faith or with the intention of causing prejudice
The courts will regard the conduct as unfair if a hypothetical reasonable bystander would believe it to be unfair
-
-