Monday, 3 June 2013

UK: England and Wales: capital maintenance - damages award not permissible

The High Court gave judgment last week in Abbar v Saudi Economic & Development Company (Sedco) Real Estate Ltd. [2013] EWHC 1414 (Ch). One of the questions considered was whether it was open to the court to make an award for damages in respect of a breach of contract where that contract brought about an unlawful return of capital to the shareholders. The trial judge held that an award for damages was not permissible and stated (at para. [240]): "An award of damages to a shareholder for a failure to repay capital to the shareholder is equally a return of capital. It is for that reason that the statutory provisions in the Companies Act 2006 dealing with the redemption and purchase of shares by a company exclude damages as a remedy for breach. A redemption or purchase of shares by the company can be enforced only through the statutory mechanism."

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