In the absence of any recourse under the articles of association or any shareholders' agreement, aggrieved shareholders are often reminded of their rights under s.994 of the Companies Act 2006 to apply to the court for relief if they suffer unfair prejudice.
The court has wide powers and the potential respondents, while usually the other shareholders, could include past shareholders or persons who are not shareholders at all (such as directors). The right is available to shareholders and even non-shareholders who have had shares transferred to them but are awaiting registration on the register of members or those who have had shares transferred to them by the operation of law (such a trustee in bankruptcy or the personal representatives of a deceased shareholder). It is therefore an attractive option.
However, to ensure that a petition is not dismissed in the first instance, petitioners should be reminded that any unfair prejudice suffered must be as a result ofan act or omission of the company or the way in which the company's affairs are being conducted; it cannot be just a disagreement between the shareholders.
InBrierley v Howe & Anor (Re 36 Bourne Street Ltd – Companies Act 2006) [2024] EWHC 2789 (Ch) (06 November 2024), one of the company's shareholders ("A") claimed that they had entered into an agreement with another shareholder ("B") under which A would be awarded further shares in the company in return for services provided by A to the company and therefore B held such shares for A on trust and were obliged to transfer such shares to A. The court dismissed A's petition. While other grounds for the petition were cited by A, the judge found that the arrangement between the two shareholders was "not an arrangement that would or is said to involve the Company in any way". As a result, any prejudice did not arise from an "act or omission of the company", nor from the way the company's affairs were being conducted.
This case shows the importance of recognising the grounds in which a petition for unfair prejudice under s.994 of the Companies Act 2006 stems from and its limits and cannot be used as a means by which to dispute any behaviour if it does not involve the company itself.
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