SHAREHOLDERS – COMPANY MANAGEMENT – UNFAIRLY PREJUDICIAL CONDUCT – PURCHASE OF MINORITY SHAREHOLDING WITHOUT DISCOUNT

[Companies Act 1985 s.459.]
Siblings B, M and H were equal shareholders and directors of GHM. After B’s removal from office she sought an order under the Companies Act 1985 s.459 that GHM, or M and H in the alternative, be ordered to purchase her shares without any discount being applied to reflect her minority shareholding. There was a dispute over whether GHM’s affairs had been conducted in a manner unfairly prejudicial to B and whether B had a legitimate expectation that, if she was excluded from participation in GHM, she would receive a reasonable offer for her shares. M and H relied on GHM” contractual right to terminate B’s employment and, on a breakdown in the necessary relationship of trust and confidence between them, to content that B had not suffered unfair prejudice by her removal.

Held, granting the application, that the question of relief under s.459 fell to be determined by reference to what was fair. However, different standards of fairness pertained to business people than to family members. Service agreements between individual directors and GHM did not alter the equitable position with regard to the shareholders in the absence of some agreement or understanding to that effect. Nothing in the arguments put forward by M and H served to change the established practice of not ordering a discount to be applied to a minority shareholding, O’Neill v. Phillips [1999] 1 W.L.R. 1092, [1999] C.L.Y.634 applied.

BROWNLOW v. GH MARSHALL LTD [2000] 2 B.C.L.C. 655, Richard McCombe Q.C., Ch D.

“Current Law” March 2001