Section
994(1) Companies Act 2006, replacing section
459 Companies Act 1985, provides that a member of a company may apply to the
court by petition for an order on the ground:
(a) 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
(b) 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.
Cases law reveals that section 994 may be used to obtain a personal remedy despite
the proper claimant rule.
Section
112 defines ‘a member’ as a subscriber to the company’s memorandum and
‘every other person who agrees to become a member of the company and whose name
is entered in its register of members’. The section is satisfied whenever a
person assents to become a member without the necessity of a contract in the
strict sense (Re Nuneaton Borough
Association Football Club Ltd (1989)).
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Unfair
prejudicial conduct - Conduct of the company’s affairs
Section
994(1) states that a petitioner must establish unfairly prejudice conduct
arising from some corporate act or omission, including any act or omission on
the company’s behalf.
A special resolution to amend the
articles to exclude pre-emption rights in a company could amount to
unfairly prejudicial conduct in the company’s affairs (Re Smiths of Smithfield Ltd (2003)).
The action of the board of directors
is clearly conduct of the company, but disputes between shareholders
relating to dealings with their shares is not (Re Unisoft Group Ltd (No. 3) (1994)).
David Richards J in Re
Coroin Ltd, McKillen v Misland (Cyprus) Investments Ltd (2012) stated that
the conduct complained of must centre on how the company affairs have been
managed, therefore personal disputes between the shareholders is
generally fall outside the scope of section
994, unless the personal disputes in question translate into acts
or omissions of the company or the conduct of its affairs. The relations
between the shareholders inter se are adequately governed by the law of
contract (including the section 33
provision) and tort. In addition, shareholder agreements and service contracts
shall be included (Re Ringtower Holding
plc (1988)).
In Re
Legal Costs Negotiators Ltd (1999), the company was incorporated by four
individual, who were the equal shareholder, and also the employees
and directors of the company. One of them was dismissed as an employee
and he resigned from the board before the others resolve to remove him. He
remained as a shareholder. The majority petitioned under section 459 Companies Act 1985 seeking an order that he should transfer his
shares to them. This was rejected by the court because the majority
shareholders could prevent any prejudice being inflicted by him on the company.
Simply remaining as a shareholder was not conduct relating in the company’s
affairs. According to the court, the conduct complained of must be something
relates to the company affairs, rather than an individual shareholder in
his private capacity.
However, in the case of Re Home & Office Fire Extinguishers Ltd
(2012), two brothers (S and G) were the directors and equal shareholders in the
company. S attacked G with a hammer at the company’s premises following G’s
refusal to make a salary advance. G had refused because the company was in a
poor financial state. S was charged with GBH but was acquitted. The judge held
that S’s conduct related to the company affairs because it was a breach of
the implied understanding that he and G would act properly and in good
faith towards each other. It was a single event which made it impossible
for them to continue their association as directors and shareholders in
the company. The court therefore ordered S to sell his shares to G.
In Re
Phoneer Ltd (2002) it was held that where the petitioner is withdraws
from the management of the company in breach of an undertaking given by
him, while not strictly speaking an act of the company, did fall within the
scope of conduct of the company affairs. However, a strict line is drawn where
the conduct in question is that of something relates to the company affairs,
rather than the shareholder or director in his private capacity.
In Oak
Investment Partners XII, Limited Partnership v Boughtwood (2009), Sales J stressed that the provision was
concerned with the practical reality which obtained on the ground in
relation to the conduct of a company’s affairs, therefore it make sense for the
exclusion of a director or senior employee from the management to
be qualified as conduct of the company’s affairs. He took the view that in
deciding whether a particular conduct is fall within the scope in the
provision, the courts have the take into account many considerations to
check what might constitutes the carrying on of the company’s affairs. He
considered that the conduct if a significant shareholder or director who improperly
asserts control over the management of the company’s affairs may be acting
in an unfairly prejudicial manner. Furthermore, the conduct need not be done in
the capacity as a director, acting as a senior manager may also be
sufficient to attract the relief under the provision. In such situations the
court may order the shareholder who has caused the unfair prejudice to sell his
shares to the petitioner.
The conducts of a parent company can
be regarded as falling within its subsidiary company’s affairs. In Nicholas v Soundcraft Electronics Ltd (1993),
the Court of Appeal held that the failure of a parent company (Electronics) to pay debts
due to its subsidiary (in which the petitioner was a minority shareholder)
constituted acts done in the conduct of the company affairs. Conversely, Sir Martin Nourse in Re City Branch Group Ltd, Gross v Rackind
(2005) took the view that in the right circumstances the conducts of a
subsidiary also can be regarded as falling within the its holding
company’s affairs. As Phillimore J
in R v Board of Trade, ex p St Martins Preserving Co Ltd
(1965) stressed that the subsidiary’s affairs can be affairs of its holding
company, as in the case itself, the directors of the holding company, which representing
a majority of the directors of the subsidiary, are necessarily controls
the subsidiary’s affairs.
In Lloyds
v Casey (2001) the court permitted the petitioner to include allegations
relating to conduct which took place before he became a registered
shareholder in the company on the basis that the section states that ‘the
company’s affairs are being or have been conducted in an unfairly prejudicial
manner’.
Unfair
prejudicial conduct – Interest qua member
The petitioners must establish that his or
her interests as a member have been unfairly prejudiced as a result of
conduct on the part of the company.
The word ‘interest’ is wider than legal
rights. Peter Gibsons J in Re Sam Weller & Sons Ltd (1990)
opined that the term ‘interest’ has been used because the Parliament has
recognised that members may have different interests, even if their
rights as members are the same.
Members have an interest in the value of
his or her shareholding. In Re Bovey
Hotel Ventures Ltd (1981), Slade J held that a member of a company will be
able to bring himself within the section if he can show that the value of his
shareholding in the company have been seriously jeopardized by reason of
a course of conduct on those who had de facto control of the company, which has
been unfair to the member concerned.
Hoffman
J (as he then was) in the case of Re
a Company (No. 00477 of 1986) (1986) stressed that generally the provision
must be limited to conduct which is unfairly prejudicial to the interest of the
members as members. However the application must take into account that the
interests of a member are not necessarily limited to his strict legal rights
under the company’s constitution. The term ‘unfairly’ in the provision, just as
the term ‘just and equitable’ in section
122(1)(g), enables the court to have regard to wider equitable
consideration. He went on to illustrate some typical example how the
equitable considerations may come into play in practice. In a small private
company, a shareholder may have a legitimate expectation that he
will continue to be employed as a director and his dismissal form that office
and exclusion from the management of the company may therefore be unfairly
prejudicial to his interest as a member.
The question of whether a court will
recognise a member’s so-called legitimate expectations as falling within
interests which may be unfairly prejudiced has recalled the Lord Wilberforce’s development in the
case of Ebrahimi v Westbourne Galleries
Ltd (1973). As I mentioned above, the court will take into account a wider
equitable consideration, rather those strict legal rights of the member as
provided in the company’s constitution, Companies Act and other relevant collateral
agreements, to see whether the court shall give effect to the so-called
legitimate expectation, only if:
(a) The basis of the business association was
a personal relationship and mutual confidence (generally found where a
pre-existing partnership has converted into limited company)
(b) An understanding that all or certain
shareholder (excluding ‘sleeping’ partners) will participate in management
(c) There was a restriction on the transfer of
members’ interests preventing the petitioner leaving.
Even though the parties have not expressly
agreed that the petitioner will participate in the management of the company,
the court may imply such an undertaking from the conduct of the
parties (Re Fildes Bros Ltd
(1970)).
However the House of Lords in O’Neill v Phillips (1999) has reconsidered the Lord Wilberforce’s development and placed some judicial scrutinizes
on it. Here P used to be the sole shareholder and director in the company. He
gave 25% shares to one of his manual workers, O, and appointed him as a
director. A year later the appointment of O, S retired from the management,
leaving O as sole director. When a dividend was declared, P waived a third of
his 75% entitlement in favour of O to produced equality. There has also been
discussion that O may obtains a 50% shareholding, but no agreement was concluded.
Subsequently P discovered that the company was having financial difficulty and
decided to return to the management. He gave O the option of managing, the UK
or German branches of the business. O chose to go to Germany and remain on the
board as an ordinary director. Later P told O that he would be paid only his
salary and any dividend payable upon his 25% shareholding. O issued a petition
under section 459 Companies Act 1985, claiming
that the company’s affairs were being conducted in manner that is unfairly
prejudicial to his interest qua member. The petition was refused in the first
instance, but was granted in Court of Appeal. House of Lords allowed the P’s appeal, held that the O’s
interest was not unfairly prejudiced by P’s conduct.
House of Lords held that P’s conduct would have been
unfairly prejudicial if he used his majority voting power to exclude O from the
business. This he had not done, and P simply revised the terms of O’s
remuneration. This was not unfairly prejudiced to O’s interest because the
negotiations between them for O to obtain more shareholding was not
concluded in contract, so no contractual undertaking had been
entered into by them. The negotiation itself is insufficient to constitute a
legitimate expectation and bring in the equitable consideration. O therefore
failed to prove that P’s conduct was both unfair and prejudicial.
According to Lord
Hoffman:
(a) A company is an association of persons
for an economic purpose, usually entered into with legal advice and
some degree of formality. Thus the manner in which the company’s affairs
may be conducted shall refer to the article of association and other collateral
agreements between the shareholders.
(b) The company has developed seamlessly from
the law of partnership, which was treated by equity, as a contract
of good faith. Thus in appropriate circumstances, the principle of equity
shall be carried over company law to constrain the exercise of strict legal
rights in certain relationships which would be considered as contrary
to the good faith.
(c) However the complain of unfairness will
not ordinarily available to the member of company, unless there has been some breach
of the terms on which the parties agreed that the affairs of the
company should be conducted.
(d) The petition may be allowed if equitable
considerations make it unfair those conducting the company’s affairs
of the company to rely upon their strict legal rights, which is in
breach of the agreement between the parties.
In Re
a Company (No. 004377 of 1986) (1987), the majority, including the
petitioner, voted for a special resolution to amend the company’s article so as
to provide that a member, on ceasing to be an employee or director of the
company, would be required to transfer his or her shares to the company. The
petitioner was dismissed from his directorship as a result of management
deadlock, and he was offered to sell his shares. He declined the offer and
petitioned to the court under section
459 Companies Act 1985, arguing that he had a legitimate expectation to continue to
participate in the management of the company which, he argued, was in essence a
quasi-partnership. Hoffman J (as
then he was) refused the petition and held that the conduct of dismissal was not
contrary to the good faith because there has been a resolution that the
petitioner is voted for and the petitioner shall be responsible for the
bargain he made. Besides, there was no unfairness on the part of the
offer, because the offer was valued by the company’s auditors in accordance
with the pre-emption clauses.
In Re
Saul D Harrison & Sons plc (1995), the company’s business was in
jeopardy for years to the extent that any reasonable board would have put it
into voluntary liquidation and distributed its considerable assets to the
shareholders. The petitioner, who obtains “Class C” shares as a result of
legacy, was entitled to the rights to dividends and capital distribution in a
course of liquidation, but has no entitlement to vote. The Court of Appeal recognised that
the personal relationship between a petitioner and controlling members may be
one that could give rise to legitimate expectation, however Hoffman LJ stressed that in the absence
of ‘something more’, there can be no basis for finding a legitimate
expectation which goes beyond the articles. In the case itself, the
petitioner’s rights were exhaustively laid down in the articles of association.
It appears that how the petitioner obtains
the share is an influential factor in the finding of legitimate expectation (Re Saul D Harrison & Sons plc). In Jackman v Jackets Enterprise Ltd
(1977), the petitioner’s claim that her exclusion from participating in the
company’s management constituted oppression was dismissed. The court, in
finding no such expectation on her part, had regard to the fact that she had
acquired her shares by way of gift.
It appears that a legitimate expectation
is more likely to be found in small quasi-partnership types of private
limited companies where the joint ventures enter into business on the basis
of certain fundamental understandings about management participation (Strahan v Wilcock (2006)). Vinelott J in Re Blue Arrow plc opined that, the outside investors of public
listed companies assume that the company’s affairs would conducted in
accordance to the constitution and Companies Act, which render no room for any legitimate
expectation to be founded.
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Unfair
prejudicial conduct – Unfair Prejudice
The conduct complained of must be both
prejudicial and unfair to the relevant interests (per Arden LJ in Re Tobian
Properties Ltd (2012)).
The statutory provision does not define
unfairly prejudice conduct, and early cases took the view that unfair
prejudice should be objectively determined.
Slade
J in Bovey Hotel Ventures Ltd
(1981) stressed that the test is whether a reasonable bystander
observing the consequence of the conduct in question would regard it as having
unfairly prejudiced the petitioner’s interest.
The Court of Appeal in Re Saul D Harrison & Sons plc (1995) took the opportunity to
re-examine the objective concept of unfair prejudice. Hoffman LJ doubted the appropriateness of objective standard, by
which the fairness under section 459
must be viewed in the context of a commercial relationship and that the article
of association are contractual terms which govern the relationship of
shareholders with the company and among themselves inter se. He stressed that
the starting point in any case under section
459 will be to ask whether he conduct of which the shareholder complains
was in accordance with the articles of association, rather than be
determined by a reasonable bystander.
As I mentioned above, Lord Hoffman in the case of O’Neill
v Phillips (1999) has reconsidered the issue and reformulated the test. In
order to establish unfair prejudice, a petitioner must prove either a breach
of contract (referable to the article of association or shareholders’ agreement), or a breach
of some fundamental understanding in which case equity will intervene to
preclude the majority from breaching such an obligation despite the fact that
it lacks contractual force.
In shorts, the court will first looks at
whether or not the conduct complained about is in accordance to the article of association and
other collateral agreements between the shareholders. If it is not, the court
will next consider the scope of any fundamental understandings between the
parties. Unfairness is not to be tested by reference to subjective notions of
fairness but is to be determined by applying settled equitable principle to see
whether the conduct of majority was contrary to the good faith in the eyes of
equity (Re Guidezone Ltd (2000)).
Examples
of unfair prejudicial conduct
(i)
Exclusion form management
This is the typical kind of unfair
prejudicial conduct. As I mentioned above, in a small quasi-partnership type of
company a member may, on the basis of a fundamental understanding between the
parties that he shall continue to participate in the management of business
notwithstanding that a director could be legally removed by ordinary
resolution under section 168 Companies Act 2006.
For example, in Re Ghyll Back Driving Range (1993), the company was incorporated by
4 individuals to operate a golf range. They were each equal shareholders and
director. Subsequently the parties fell out and the petitioner was increasingly
isolated. It was alleged that the business was run without consulting
him. It was held that the petitioner had indeed been unfairly excluded from
the management of the company where it was contemplated that the business would
be managed by all four for the mutual benefit. The court therefore ordered
the majority to purchase the petitioner’s shares.
Such legitimate expectation is hard to be
founded in case of an outside investor because the expectations of such
members rarely go beyond the hope of obtaining a return on their investment
(Re Blue Arrow plc (1987) and Re Posgate & Denby Agencies Ltd
(1987)). For example, in Re Tottenham
Hotspur plc (1994), the petitioner failed his action because the court held
that he could have no legitimate expectation of remaining in the control
of the company.
In a situation where the exclusion of
management was a result of deadlock between the parties, early case
like Re R A Noble & Sons (Clothing)
Ltd (1983) suggested that it may justify the winding-up order under the
just and equitable ground, but once the petitioner was partly to blame for
contributing the deadlock in relations, the petitioner is not entitled
to rely on the provision of unfair prejudicial conduct whatsoever.
However more recent authority, like in the
case of Re XYZ Ltd (No. 004377 of 1986)
(1987), showed the court’s reluctance in following the fault-based approach. Hoffman J drew an analogy between the
unfair prejudicial conduct petition and old-style divorce cases, commended that
it is practically impossible for two people to work together without
fault on either side. Indeed, the parties may have come together with a confident
expectation of being able to co-operate but found that insurmountable
differences in personality made it impossible. Following the above,
if one of them is asking the other to leave the business, it cannot be
automatically be regarded as having acted in a manner unfairly
prejudicial to the interests of the other, rather, this might be the only
solution for them.
However the move away from a fault-based
approach does not permit a shareholder to withdraw unilaterally from a company
and demand that a majority should buy him out (per Lord Hoffman in O’Neill v
Phillips). This could be seen in Phoenix
Office Supplies Ltd v Larvin (2003), where the petitioner, who held
one-third of the shares in the company, wished to terminate his association
with the business for personal reasons. He resigned his
employment and gave notice of his intent to resign his directorship once his shares
at their full value and without discount to reflect his minority shareholding
had been agreed. He alleged that the two remaining shareholders had wrongfully
excluded him from his entitlement as director to access financial
information thereby preventing him from protecting his interest as a
shareholder. The Court of Appeal held that the conduct of the majority did not amount to
unfairly prejudicial conduct. According to Jonathan
Parker LJ, section 459 does not
confer a member of a quasi-membership company a contractual right to demand
an offer for the purchase of his shares at full and undiscounted value for
entirely his own reasons.
(ii)
Mismanagement
The courts are reluctant to find a
management decision by the board or majority could amount to unfair conduct. It
has long been settled that the courts will not interfere with a bona fide business decision
made by a company’s board or its majority shareholder (the internal management
rule), except where there is a clear conflict of interests (Nicholas v Soundcraft Electronics Ltd
(1993)).
In Re
Elgindata Ltd (1991), it was alleged that, inter alia, that the controlling
director had managed the company incompetently. Warner J refused to grant relief, stressed that poor management
due to a breach by a director of his duty of skill, care and
diligent, is prima facie cannot result on unfairness to a shareholder.
Indeed, the risk of poor management is a reflection of the value of the
shareholder’s investment in the company, the shareholder has on one to blame
for the events but himself.
This could be seen in the case of Re Macro (Ipswich) Ltd (1994), where an
allegation of mismanagement resulting in economic loss to the company
was found to amount to unfairly prejudicial conduct. The evidence showed that
the event has goes on for a period of 40 years, in which the sole director of
two associated companies in questions neglected his management responsibilities
and this was exploited by dishonest employees who stole commissions earned by
the state agency arm of the business. In granting the relief, Arden J distinguished the fact with the
case of Re Elgindate Ltd (1991), held
that an unfair prejudice conduct could be found, if the majority has persisted
in retaining a family member, who was demonstrably incompetence, in
charge of the management of the
company.
For an allegation of mismanagement to
succeed, Court of Appeal in Re Saul D Harrison &
Sons plc (1995) stressed that it would need to be proved that the directors
had abused their powers or exercised them for some ulterior purpose
so as to step outside the bargain between the shareholders and the company.
In Oak
Investment Partners XII, Limited Partnership v Boughtwood (2009), a
petition was allowed where a significant shareholder was appointed to
the management and engaged in a course of conduct involving improper
assertion of rights of control over the practical management of the
company’s affairs.
(iii)
Breach of director’s fiduciary duties
There have been a number of successful
petitions where the allegation has centred on directors acting in breach of
their fiduciary duties.
Mere loss of trust is insufficient
to found a petition under section 994
(Re Jayflex Construction Ltd
(2003)).
In Re
London School of Electronics Ltd (1986), it was alleged that those in
control of the company had misappropriated its assets by diverting
them to another business owned by them. It was held that the conduct
was unfairly prejudicial to the interests of the petitioner as a member of the
company.
In Re
Elgindata Ltd (1991), the director has misappropriated the company
assets, for his personal benefit and for the benefit of his
family and friends, and this has become decisive factor in the court’s
finding that his conduct was unfairly prejudicial to the interests of minority
shareholders.
In Re
Little Olympian Each-Ways Ltd (No. 3) (1995), the directors sold the
company’s business at a substantial undervalue to another company as
part of a wider transaction from which they derived significant personal
benefits. The petition was allowed.
In Dalby
v Bodilly (2005), the only director of the company, has allotted himself an
additional 900 shares, was held to be unfairly prejudiced to the petitioner.
According to Blackburne J, by
allotting himself additional shares, the director, he was plainly putting
his own interests before the petitioner, which as a consequence had forfeited
the petitioner’s confidence in his ability to conduct the company’s affairs
in a proper way.
Other examples of successful section 994 petitions brought for
breach of fiduciary duties include allegations that directors have made secret
profits (Re a Company (No. 005287 of
1985) (1986)); have exercised their powers to issue and allot shares for
an improper purpose, for example, to reduce the petitioner’s
shareholding (Dalby v Bodilly
(2005)), have diverted a corporate opportunity (Gerrard v Koby (2004)); and have abused their powers by
recommending shareholders to accept the lower of two offers for the
shares of the company without disclosing that they were promoters
of the company making the lower offer (Re a Company (No. 008699 of 1985) (1986)).
(iv)
Excessive remuneration and the failure to pay dividends
The courts are generally reluctant in
determining whether there is excessive remuneration because it is a business
judgment that shall be determined in the general meeting or the board itself.
As long as it has honestly and genuinely determined the level of
remuneration, the court will not enquire whether the award was reasonable
(Re Halt Garage (1964) Ltd (1982)).
In extreme case the court will be
prepared to hold that the failure to pay dividend or excessive remuneration
would amount to unfairly prejudicial conduct.
In Re
Sam Weller & Sons Ltd (1990), it was alleged the company had not
increased its dividend in 37 years, despite the company’s positive
performance in the years leading up to the petition. The court held that
the company’s persistent failure to pay higher dividends amounted to unfairly
prejudicial conduct.
In Re
a Company (No. 004415 of 1996) (1997), the Vice Chancellor observed that if
remuneration and dividend levels cannot be justified by ‘objective
commercial criteria’ it would seem to follow that the company’s affairs
have been managed in a way unfairly prejudicial to the interests of the
shareholders who are not directors.
In Re
Cumana Ltd (1986), Vinelott J
held that the remuneration was plainly in excess of anything that the
director had earned.
In Re
Saul D Harrison & Sons plc (1995), the same judge refused to recognise
the excessive remuneration because the alleged sums did not exceed those
which other comparable companies paid their executive directors.
In Anderson
v Hogg (2002), the director pay himself an unauthorized and excessive
sum as a redundancy payment was held to be unfairly prejudicial to
the petitioner’s interest.
In Re
Tobian Properties Ltd (2012), the majority shareholder, who was also the
sole director of the company, had awarded himself excessive remuneration. The Court of Appeal has allowed the petition. Arden LJ
commended that if the minority shareholders did not read their company’s
account in order to monitor whether there is excessive remuneration, they
are at risk of losing their right. Although this approach imposes a
requirement for diligence, but this requirement has no basis in the statutory
provisions or in principle or authority.
Unfair
prejudicial conduct – Remedies
If the petitioner establishes unfairly
prejudicial conduct, section 996(1)
of the Companies Act 2006 provides that the
court ‘may make such order as it thinks fit for giving relief in respect of the
matters complained of’.
The court has an extreme wide discretion
as to what type of relief should be granted, and even as to whether relief
should be granted at all.
An award of damages for reflective loss
may be granted (Re Brightview Ltd
(2004)).
In Whyte
Petitioner (1984) the court issued injunction to prevent the
majority shareholders removing a director from the board. In Re a Company (No. 002612 of 1984)
(1985), the court issued an interlocutory injunction to prohibit a
proposed allotment of shares which would have the effect of diluting the
petitioner’s shareholding.
Section
996(2) specifies certain remedies that may be granted.
Section
996(2)(c) empowers the court to authorize a petitioner who successfully
establishes unfairly prejudicial conduct, for instance by way of a director’s
breach of duty, to bring an action in the name of the company. Such an
order is granted in the case of Re
Cyplon Developments Ltd (1982), in which the petitioner could avoid the
procedural complexity of a derivative claim.
With respect to the costs, Hoffman J in Re Sherborne Park Residents Co Ltd (1987) suggested that a
petitioner bringing a derivative action under this provision would be entitled
to an indemnity by way of a Wallersteiner
v Moir (No. 2) (1975) order, provided that he acted reasonably in bringing
the action (Wallersteiner v Moir (No. 2)).
The most common remedy sought is the purchase
of shares under section 996(2)(e).
For quoted companies valuing shares is a fairly straightforward exercise
because reference can be made to their market price. In relation
to unquoted companies, the court has a wide discretion to do what
is fair and equitable in all the circumstances of the case and
under the Civil Procedure Rules the
court is expected to adopt a vigorous approach towards share valuation (North Holdings Ltd v Southern Tropics Ltd
(1999)).
In Re
Bird Precision Bellows Ltd (1984), the Court of Appeal stressed that the overriding
objective was to achieve a fair price and that normally no
discount would be applied given that the petitioner is an unwilling
vendor of shares in a quasi-partnership private company. If the
shareholding is acquired by way of an investment, a discount may be
fair, so as to reflect the fact that the petitioner has little control over
the company’s management (per Lord
Hoffman in O’Neill v Phillips).
In Irvine
& Ors v Irvine (2006), the court held that for the purpose of a buyout
ordered following a successful petition under section 994, a shareholding of 49.96 per cent was to be valued as
any other minority holding. It held that no premium should be attached
to the shares simply because the buyer was the majority shareholder who would gain
control of the whole of the issued share capital.
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A promoter is a person who takes
the necessary steps to incorporate a company (Twycross v Grant (1877)). 
