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COMPANY LAW : FAIRNESS : SHAREHOLDERS : UNFAIRLY PREJUDICIAL CONDUCT : UNFAIR PREJUDICE PETITION : SALE OF INTEREST IN COMPANY IN DISPUTE TO PETITIONER : FAIRNESS OF CONDUCT IN COURSE OF BUSINESS : s.994 COMPANIES ACT 2006 : s.996 COMPANIES ACT 2006
Following a corporate restructuring, Q became P's holding company. The principal business of the new group remained in P, and it was common ground that P, and then Q and the businesses it controlled, were to be run as a joint venture between B and O in the nature of a quasi-partnership. The development of the drive system was not financed further and P became insolvent. In due course, following the administrators' sale of P's business, a company owned by O purchased it. Both O and B subsequently complained about things done by the other in relation to the affairs of Q and the conduct of P's business. O brought a petition under the Companies Act 2006 s.994 seeking relief in the form of an order that B be required to sell his shares in Q to O.
By a cross-petition, B claimed an order requiring O to sell its shares in Q to him. O contended that B had acted in a manner unfairly prejudicial to its interest in Q and, through it, in P by, in particular, seeking improperly to take control of Q by steps taken by him at a certain board meeting so as to enable himself improperly to take control of P by changes to the board of P, seeking to take an improperly intrusive and extensive role in the management of P beyond what had been agreed he should do and improperly promoting his own personal interests over those of Q and P by failing to agree to accept additional funding for Q and P by way of the issuing of equity in Q in circumstances when such additional funding was necessary to fulfil the joint venture on which he had embarked with O.
B submitted that O had acted in an unfairly prejudicial manner in relation to his interest in Q and in P by withholding important information from him and by conspiring with others improperly to exclude B from involvement in the management of P's business, to undermine his rights and influence in relation to the control of Q and O and to ensure that P's business was run in such a way as to drive it into insolvency so that O could acquire the business for itself at a fraction of its true value.
That was an atypical order to make, since it was more usual that the petitioner was seeking an order that his interest be bought out by the respondent. In the instant case, it was striking that both O, in the petition, and B, in the cross-petition, sought orders allowing them to buy out the interest of the other and so remain in control of Q themselves. On the evidence, it was appropriate that such an order be made in favour of O. Although there were points on which O's conduct was properly open to criticism, particularly in respect of failures to disclose a report or certain business contacts, O's conduct had not in fact caused actual prejudice to B.
Moreover, O's conduct was very minor by comparison with that of B. He had conducted the business of Q and P in a manner unfairly prejudicial to O by, inter alia, his persistent failure to adhere to his agreed management role, his failure to give proper consideration to the acceptance of financing proposals available to Q and P, a coup to take control of Q and P and his insistence upon a bank mandate which gave him a right of veto over expenditure items contrary to the intention under the joint venture that such matters would be for the board and management of P.
In those circumstances, it was appropriate to make an order under s.996 in favour of O requiring B to sell his shares in Q to O. The issue of setting parameters for establishing the price at which B should be required to sell his shares was adjourned.
Judgment for claimant OAK INVESTMENT PARTNERS XII LTD PARTNERSHIP v (1) MARTIN BOUGHTWOOD (2) ANDREW BOUGHTWOOD (3) STEPHEN BENNETT (4) QED GROUP LTD (2009)
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