Swift action is crucial when facing blatant manipulation, asset misuse, or resource depletion by a majority shareholder. Delay can erode the company’s value, diminishing the value of your shares even if the court mandates a sale or buy-out.
Our lawyers advise on shareholder disputes and unfair prejudice claims on a very regular basis. Based on experience, our approach involves a strategic, measured strategy geared towards a realistic settlement using appropriate pressure, compelling evidence and negotiation skill.
Grounds for a Unfair Prejudice Claim
Section 994 of the Companies Act 2006 empowers aggrieved shareholders to petition the court for relief if they feel unfairly prejudiced by acts of the company or its directors.
The court considers various factors to establish unfair prejudice, including:
- Conduct: Was there specific conduct by the company or directors that disadvantaged you as a shareholder?
- Prejudice: Did this conduct negatively impact your rights as a shareholder (e.g., dividends, voting rights)?
- Unfairness: Was this impact unfair and unjustified in the context of the company and its shareholders?
Examples of Unfair Prejudice:
- Exclusion from decision-making: Blocking your participation in meetings or crucial company decisions.
- Financial mismanagement: Diverting resources or profits unfairly to benefit other shareholders.
- Dilution of share value: Issuing new shares or altering capital structure to reduce your voting power or stake.
- Oppressive conduct: Excluding you from accessing information or exercising your shareholder rights.
Risks of starting an unfair prejudice claim
These can include :-
- Disruption to Business: The dispute can cause disruptions within the company, potentially impacting operations and employee morale.
- Legal Costs: Unfair prejudice claims are complex and require specialized legal support. Legal fees can be substantial, and even if you win, you may not recover all your costs.
- Security for Costs: The court may require you to provide security for the other party’s legal costs if your claim is deemed weak or frivolous.
- Adverse Costs Order: If your claim fails, you might be liable for the other party’s legal costs, further increasing financial strain.
- Lengthy Process: Unfair prejudice cases can take several years to resolve, demanding significant time and emotional investment.
Proving Unfair Prejudice
The burden of proof lies with the claimant. Gathering evidence is crucial, such as:
- Company documents: Shareholder agreements, board minutes, financial statements.
- Communications: Emails, letters, recordings documenting discriminatory or prejudicial conduct.
- Expert reports: Valuations, financial analyses supporting your claim of prejudice.
Potential Outcomes
If successful, the court can order various remedies, including:
- Financial compensation: Recovering losses suffered due to the unfair prejudice.
- Winding up the company: If deemed the only viable option to achieve justice.
- Buying out your shares: Allowing you to exit the company at a fair price.
- Restructuring the company: Changing aspects of the company’s structure or governance to rectify the prejudice.
Our Team
Our team, led by our senior partner Hal Branch, are very experienced in such matters and would be pleased to discuss any issues that you may have.
