Unfair Prejudice and Just and Equitable Winding Up

Question 1

What is an action for unfair prejudice?

Answer 1

Action brought by shareholders on grounds that company is being run in such a way they have suffered unfair prejudice

Question 2

What are examples of unfairly prejudicial conduct?

Answer 2

• granting of excessive remuneration to directors
• directors’ dealing with associated persons
• non-payment of dividends

Question 3

Does the shareholder bring a claim on behalf of themselves or the company?

Answer 3

Themselves

Question 4

Is negligence or inept management of a company unfairly prejudicial conduct?

Answer 4

No

Unless conduct amounts to serious and/or repeated mismanagement which puts at risk the value of the minority shareholder’s interest

Question 5

Are disagreements as to company policy unfairly prejudicial conduct?

Answer 5

No

Question 6

Is bad faith unfairly prejudicial conduct?

Answer 6

No - no requirement to show bad faith or deliberate intent for conduct to be unfair

Question 7

Is the claimant’s conduct relevant in bringing a claim for unfairly prejudicial conduct?

Answer 7

May be relevant but no requirement that they come with clean hands

Question 8

Is excessive director renumeration unfairly prejudicial conduct?

Answer 8

Potentially - court take a wide view

Question 9

Is failure to meet legitimate expectations of shareholders in regards to being involved in management unfairly prejudicial conduct?

Answer 9

Yes may amount to unfairly prejudicial conduct

Question 10

What remedies are available for unfair prejudice?

Answer 10

Court can grant such order it sees fit.

Normally order petitioner’s shares to be purchased by wrongdoers

Question 11

How are petitioner’s shares to be valued under order for them to be purchased?

Answer 11

• court has wide discretion to set fair price
• consider valuation method in articles (if any)
• no discount applied
• valuation at date of court order
• behaviour of petitioner may be relevant

Question 12

What is a petition for just and equitable winding up?

Answer 12

Shareholder asks court for company to be wound up on grounds that it is just and equitable to do so

Question 13

When for court grant petitioner for just and equitable winding up?

Answer 13

Court has wide discretion here.

Unlikely they will opt for this if other options are available.

Very drastic solution to problems