Monday, 23 May 2022

UK: England and Wales: unfair prejudice petitions - long delays and acquiescence

The circumstances in which a shareholder's petition under section 994 of the Companies Act 2006 - the unfair prejudice remedy - will be dismissed on the grounds of delay, or acquiescence by the petitioner, have recently been considered by the Court of Appeal in Bailey v Cherry Hill Skip Hire Ltd [2022] EWCA Civ 531. Noting that there was no statutory period of limitation applicable to unfair prejudice petition, and with regard to the issue of delay, Lady Justice Andrews (with whom Snowden and Lewison LJJ agreed) observed (emphasis in the original): 

.... there is a distinction to be drawn between a shareholder who knows he has been excluded from active involvement in the company's affairs and fails to complain about that for many years, and a passive shareholder who knows he is not getting the company's accounts or an invitation to the AGM and is not receiving dividends and does nothing about any of those matters, but then discovers years later that money or corporate opportunities have been diverted from the company for the benefit of its directors ... The distinction lies in the fact that in the absence of evidence to the contrary, a shareholder is entitled to assume that the company is being managed properly by its directors in accordance with their fiduciary and statutory duties, and that its constitution has been followed" (para. [46]). 


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