Covid 19: Our website and phone lines are operating as normal and our teams are on hand to deal with all enquiries. Meetings can be conducted via phone & video conferencing.

Unfair Prejudice

On previous pages I referred to s994 Companies Act 2006.

It's worth looking at in detail:

A member of a company may apply to the court by petition for an order under this Part on the ground:

  • 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), or .
  • that an actual or proposed act or omission of the company (including an act or omission on its behalf) is or would be so prejudicial.

The act provides that those who acquire shares through operation of law (e.g. on death) have the same rights as a member.

In practical terms such claims are brought against those who control the company - the majority shareholder(s)/directors - so the remedy is often said to prevent "fraud on a minority” although it extends far more broadly than fraud would suggest.

Interestingly the test is objective: the Court need not find bad faith or conscious intention on the part of the controllers to treat the claimant badly, but both elements of the test must be made out i.e. there must be both unfair and prejudicial behaviour. The Court's starting point will be to look at the contractual terms i.e. the articles of association, and the powers entrusted to the board, to consider what could have and should have been done.

"Unfair” is a broad brush term, allowing the Court to look at the wider interests of the parties and the rights and obligations adopted and expected by the members (i.e. shareholders). It is in this context that quasi partnership issues arise (see previous).

In the absence of a quasi partnership the Claimant must show some abuse by directors of their powers, or an infringement of their strict legal rights under the company's constitution or the law.

As you would expect, in an article of this length, there cannot be a definitive  statement of the law, and this article does not offer specific legal advice.

Get in Touch

For expert legal advice on unfair prejudice, contact us today on 0800 083 0815 or fill out an online contact form.

Corporate News

Quasi Partnerships – recent developments

Clough & Willis’ corporate & commercial department acts for Tribo Rail UK Limited

Clough & Willis advises JamJar Investments on two investment deals

Read All Corporate News

What Our Clients Say

Many thanks for the help, advice and guidance

Mr Martindale

I have had need to use other solicitors - but was unhappy with their performance. I would always choose Clough & Willis in the future

Ms Ball

I found Fiona very clear and to have a very pleasant manners, I felt she had a personal interest.

Dr Stein

I would like to take the opportunity to say Fiona Gaskell was more than helpful and went the extra mile during my disputed land situation. She remained professional but allowed personable approach. Thank you.

Ms J Hall

May I thank you for a first class service, excellent guidance and the support I received from you was wonderful and helped me to cope with a very difficult situation.

Mrs J Atkinson

Fiona Gaskell is a true professional along with her colleagues, many thanks for all your hard work.

Mr Dixon

Excellent service, more than we hoped for

Mr Andrew

I am so pleased with how Mr Macwilliam handled my case. He was extremely helpful and patient with us. I would recommend him 100% to anyone who needed a solicitor.

Mr Ashfaq

Read all testimonials