Unfair prejudice petitions under the Companies Act 2006: rights and remedies

by Practical Law Corporate (based on material originally contributed by Matthew Morrison KC, Serle Court)

A practice note that analyses a company member's right to petition for relief against unfair prejudice under section 994 of the Companies Act 2006 (CA 2006) and the available remedies for successful petitioners under section 996 of the CA 2006. This practice note examines who is eligible to bring a petition, the entities to which the rules apply, and what constitutes the "affairs of the company". It explores the concepts of prejudice to a member's interests and unfairness, outlining how courts apply these principles, particularly in the context of quasi-partnerships. The note provides examples of conduct that may be deemed unfairly prejudicial, such as breaches of fiduciary duty, exclusion from management, excessive remuneration, and diluting a minority's shareholding. This practice note also details the wide range of remedies the court can order, with a focus on share purchase orders, valuation principles, and the evolving case law surrounding the application of a minority discount. Finally, it considers potential bars to relief, including fair offers to purchase shares, contractual exit provisions, and petitioner misconduct.