22 Mar 2023
22 Mar 2023
A member of a company may seek to remedy themselves where unfair prejudice arises under Section 994 of the Companies Act 2006. A claim will be considered well founded when the affairs of the company have been conducted in a manner considered unfairly prejudicial to the interests of the members, or where an actual or proposed act or omission of the company is considered prejudicial.
The court will impose an appropriate order with a wide range of remedies available in the event that the petitioner is found in favour of an unfair prejudice petition. Section 996 of the Companies Act enables the court to regulate the conduct of the company and apply orders that may include the company’s affairs in the future.
It is important to assess each case on its own merits before an order is made, it may be found that the company is prevented from doing or continuing an act that the petitioner has complained of or has omitted to do. The breadth of the remedies available enables the court to respond adequately and assess the appropriateness of a remedy given the many factual backgrounds of disputes.
Further remedies can include authorising civil proceedings to be brought in the name or on behalf of the company, or require the company not to make any, or any specified, alterations in its articles without the leave of the court. This flexibility allows for consideration of the unfairly prejudicial conduct, and enables the court to, ‘make such order as it thinks fit for giving relief in respect of the matters complained of'.
It’s worth noting that a significant number of cases will have undoubtedly resulted in the breakdown of the relationship between the parties. Enforcement of a remedy could assist in aiding a clean break between the parties, for example the most commonly imposed remedy under Section 996 is for the court to make a purchase order, typically, the petitioners minority shareholding in the company will be bought by the wrongdoing member(s).
Given the above, a more uncommon order can be made where the majority members of the company can be ordered to sell their shares to the minority petitioner, occurring typically when the majority are found unfit to appropriately handle the affairs of the company.
There is no limitation period for bringing an unfair prejudice petition, but the longer the petitioner delays, the court will be less imposed to grant relief. The petitioner may be at greater risk of being found to have enabled any unfairly prejudicial acts to occur. To ensure that the necessary steps are taken, it is important that the petitioner seeks independent legal advice to understand their position and limit as much risk to strengthen their chances of a successful unfair prejudice petition.
