Unfair Predjudice Flashcards
What is the purpose of the unfair prejudice remedy under Section 994 of the Companies Act 2006?
It allows minority shareholders to petition the court if the company’s affairs are conducted in a way that is unfairly prejudicial to their interests as shareholders.
What are the two key grounds for bringing an unfair prejudice claim under Section 994(1) CA 2006?
- The company’s affairs are conducted in an unfairly prejudicial manner.
- An actual or proposed act or omission of the company is unfairly prejudicial to the member’s interests.
How does unfair prejudice differ from derivative claims?
Unfair prejudice focuses on the petitioner’s rights as a shareholder and personal remedies, while derivative claims address wrongs against the company as a whole.
What is the most common remedy for an unfair prejudice claim?
A share purchase order, requiring the majority shareholders to buy the minority’s shares at a fair value.
What must a petitioner demonstrate to succeed in an unfair prejudice claim?
That the conduct complained of is both prejudicial to their interests as a member and unfair.
What is the significance of Foss v Harbottle (1843) to minority shareholder remedies?
It established the principle of majority rule and limited minority shareholders’ ability to bring claims, leading to the development of statutory remedies like unfair prejudice.
What role does Section 996 CA 2006 play in unfair prejudice claims?
It grants courts broad discretion to provide remedies, including share buyouts, regulation of future company affairs, or financial compensation.
What type of conduct is typically excluded from unfair prejudice claims?
Personal disputes or disagreements between shareholders that do not affect the management of the company.
How did O’Neill v Phillips (1999) define unfairness in the context of Section 994?
Unfairness must involve a breach of equitable considerations, such as legitimate expectations or abuse of power.
What is a quasi-partnership, and how is it relevant to unfair prejudice claims?
A quasi-partnership is a company where shareholders have an implicit understanding of mutual participation in management. Exclusion from management in such companies often constitutes unfair prejudice.
In which case was exclusion from management deemed unfairly prejudicial due to a quasi-partnership structure?
Ebrahimi v Westbourne Galleries Ltd (1973).
What does the court consider when assessing ‘unfairness’ in an unfair prejudice claim?
Whether a reasonable bystander would view the conduct as unfairly prejudicial.
How can a failure to pay dividends result in unfair prejudice?
If the majority uses their control to withhold dividends unfairly, depriving minority shareholders of a fair return on their investment.
What did Re Sam Weller & Sons Ltd (1990) establish regarding dividend policies?
Withholding dividends without justification can be unfairly prejudicial to minority shareholders.
Can mismanagement of company assets constitute unfair prejudice?
Yes, mismanagement or misuse of company assets that diminishes shareholder value can form the basis of a claim.
What is the role of legitimate expectations in unfair prejudice claims?
Breach of legitimate expectations, such as continued involvement in management, can constitute unfair prejudice, particularly in closely-held companies.
How did Re Saul D Harrison & Sons plc (1995) influence the interpretation of unfair prejudice?
It emphasized the need for a breach of equitable expectations or abuse of power to establish unfair prejudice.
What type of conduct involving share issuance may constitute unfair prejudice?
Share dilution or improper issuance of shares to alter the balance of control unfairly.
In which case was share dilution considered unfair prejudice?
Re a Company (No. 00370 of 1987).
Can financial misconduct by directors form the basis of an unfair prejudice claim?
Yes, actions like excessive remuneration or misappropriation of funds can be deemed unfairly prejudicial.
What remedies might a court order beyond share buyouts in unfair prejudice cases?
Courts may order injunctions, amend the company’s constitution, or regulate future conduct of the company’s affairs.
Why is the remedy of a share buyout particularly common in unfair prejudice cases?
It provides a practical solution by allowing the minority shareholder to exit the company while receiving fair value for their shares.
How does Re Legal Costs Negotiators Ltd (1999) distinguish personal disputes from company affairs?
It held that personal disputes unrelated to company management do not form the basis of an unfair prejudice claim.
What does Section 994(1)(b) CA 2006 address?
It allows claims based on actual or proposed acts or omissions of the company that would be unfairly prejudicial.