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Unfair prejudice petition
That the company’s affairs are being or have been conducted in a manner that is unfairly prejudicial to the interests of members generally or of some part of its members (including at least himself), - ON BEHALF OF SH THEMSELVES
Who is able to petition ?
A member of the company
non-members who shares have been transferred or transmitted by operation of the law
Secretary of state
Creditors
What is ‘Unfair prejudice’ Test
Objective test: ‘The test of unfairness must, I think, be an objective, not a subjective one … the test, I think, is whether a reasonable bystander observing the consequences of their conduct, would regard it as having unfairly prejudiced the petitioner’s interests’ – Re Bonvey Hotel Ventures Ltd (1981)
Unfairness
Unlawful - of course if it breaches the articles or contractual agreement
Lawful - unfair if it breached legitimate expectations/ equitable considerations
Members Interest: Scope
Members formal right as per Articles
Legitimate expectations arising for SHs understanding - restricted to a quasi-partnership
Characteristics of quasi-partnership
Company formed on mutual trust
There will be an agreement that some or all of the members will be involved in management
Shares will not be freely marketable, meaning that an aggrieved shareholder may be locked in the company
Legitimate expectations: O’Neill v Phillips
Parliament has chosen fairness as the criterion by which the court must decide… a wide power to do what it considers to be just and equitable. But this does not mean that the court can do whatever the individual judge happens to think fair. The concept … must be … based upon rational principles.’ Quoting another case with approval: ‘The court… has a very wide discretion, but it does not sit under a palm tree.’
Suggested scheme by the law commission
Member of private company may apply to court for an order under this section on the groups of their exclusion from participation in management of the company
Only when min 2 members, max 5 ; company formed or continued on the basis of a personal relationship - mutual trust
before exclusion there was agreement member would participate in management
Remedies - S.996
Court can make any order
Most common: reasonable offer to buy out the petitioner
Sale of the majority shareholders shares to petitioner
Require company to refrain from doing something
Authorize Civil proceedings to be brought in the name and on behalf of the company by such person
Requiring the company to make/not make special alterations to articles
Regulate companies future conduct