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Suffered Prejudice as a Minority Shareholder? Consult a Solicitor

Minority shareholders may have little say over a company's day-to-day management but they are entitled not to be subjected to unfair prejudice by the majority. The High Court made that point in the context of a family company that became the focus of a bitter rift between a mother and son.

The son owned 20 per cent of the shares in the company and his mother owned the remaining 80 per cent. Following a falling out between them, the mother used her position within the company to cause the son's dismissal as an employee and his removal as a director. His response was to launch proceedings under Sections 994-996 of the Companies Act 2006, alleging that his position as a minority shareholder had been unfairly prejudiced.

In upholding his claim, the Court found that the company was a quasi-partnership and that justice demanded that the mother purchase his shareholding. His deceased father had at least encouraged him to give up his university education to join the family business. There was an implicit understanding within the family that he would take control of the company in due course and that he would continue to be employed in a managerial role for so long as he remained a shareholder.

The Court ruled that, by causing the company to dismiss her son and exercising her power to remove him as a director, and in doing so without offering to purchase his shares at a fair value, the mother had caused the company's affairs to be conducted in a manner that was unfairly prejudicial to him as a minority shareholder. She was ordered to buy the son's shareholding, which was currently valued at £512,000.

The contents of this article are intended for general information purposes only and shall not be deemed to be, or constitute legal advice. We cannot accept responsibility for any loss as a result of acts or omissions taken in respect of this article.