The jurisprudence surrounding section 994 of the Companies Act 2006 has brought forth a series of illustrative cases that highlight the court's refined approach in addressing unfairly prejudicial conduct.¹ The interaction between the provisions of the Act and the legitimate expectations of company members is scrutinized given these judicial declarations.

In Re a Company (No 004475 of 1982) [1983] 2 WLR 381, Lord Grantchester QC's ruling illustrates that the mere failure of directors to exercise their power to buy shares or to implement a scheme enhancing share prices does not ipso facto constitute unfair prejudice under section 994.² Lord Grantchester's stipulation that a claimant must demonstrate a serious reduction in the value of their shares highlights the court's cautious stance towards equating any discrepancy between articles and expectations as unfair prejudice.³ This emphasizes Dr. Wild's assertion that the courts demand more than a mere misalignment between articles and shareholder expectations to invoke section 994 remedies.

Nonetheless, the decision in Re R A Noble (Clothing) Ltd [1983] BCLC 273 by Nourse J takes a broader perspective.⁴ Nourse J distinguishes the jurisdiction of section 994 from a rigid precondition of share value reduction. This perspective resonates with Dr. Wild's observation that legitimate shareholder expectations may extend beyond the formalities of articles.⁵

With regard to Re Garage Door Associates [1984] 1 All ER 434, where Mervyn Davies J clarifies that a member can petition for winding-up on equitable grounds and seek share purchase under sections 994–996.⁶ The delicate balance between member expectations and articles is exemplified, as the court rejects the notion of abuse of process, underpinning its commitment to safeguarding minority shareholders.

However, the dichotomy between member expectations and articles is examined in valuation cases. Re Phoenix Office Supplies Ltd [2003] BCC 11 underscores that section 994 does not permit a minority shareholder to coerce others into buying their shares proportionally to the company's value.⁸ This aligns with Dr. Wild's observation that articles are not solely concerned with shareholder interests.

The significance of valuation is further illustrated in Sethi v Patel [2010] EWHC 1830 (Ch), where the court's valuation directions underscore the meticulousness exercised in determining fair share prices, considering various factors to examine an equitable outcome.⁹ The principle derived from O’Neill v Phillips, that an offer by a majority shareholder to buy out a minority at a fair value precludes subsequent unfair prejudice claims, was revisited in Harbourne Road Nominees Ltd v Karvaski [2011] EWHC 2214 (Ch).¹⁰ The latter case, however, differentiates itself by focusing on equal shareholders. The court deems it an abuse to pursue unfair prejudice claims if a shareholder has been offered terms that align with their reasonable expectations.

References

1. Companies Act 2006, s 994
2. Re a Company (No 004475 of 1982) [1983] 2 WLR 381
3. Re a Company (No 004475 of 1982) [1983] 2 WLR 381
4. Re R A Noble (Clothing) Ltd [1983] BCLC 273
5. Re R A Noble (Clothing) Ltd [1983] BCLC 273
6. Re Garage Door Associates [1984] 1 All ER 434
7. Re Garage Door Associates [1984] 1 All ER 434
8. Re Phoenix Office Supplies Ltd [2003] BCC 11
9. Sethi v Patel [2010] EWHC 1830 (Ch)
10. Harbourne Road Nominees Ltd v Karvaski [2011] EWHC 2214 (Ch)