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How is a minority shareholding valued when it is to be purchased by a majority shareholder in the context of an unfair prejudice petition?
Published on: 14 August 2018
In the context of an unfair prejudice petition under section 994 of the Companies Act 2006 (CA 2006), the court has a wide discretion as to the remedy, if any, it grants on finding that there has been unfairly prejudicial conduct.
The remedy usually sought is the purchase of the minority’s shares by the majority, at a price determined by the court and this can be regarded as the typical order to which a successful petitioner is entitled (Grace v Biagioli).
If the majority makes a plainly 'fair' offer to purchase the minority’s shares (eg offering a price determined by a reputable independent expert valuer) before proceedings begin, and which is not accepted, a petition may be struck out since such an offer means that the conduct complained of can no longer be regarded as unfair (O'Neill v Phillips).
Where an order is made for the petitioner’s shareholding to be bought out by the
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Jurisdiction(s):
United Kingdom
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Related legal acts:
Key definition:
Majority shareholder definition
What does Majority shareholder mean?
A majority shareholder is a member who hold more than 50% of the shares in a company that has voting rights attached, meaning that it can pass ordinary resolutions (or, where it holds 75% or more of the shares, special resolutions or any other resolution that must be passed by a higher majority) and therefore has a controlling interest. In a majority/minority joint venture, the majority shareholder will usually be permitted to appoint a majority of the directors to the JVC's board and/or to appoint a chair (potentially with a casting vote) and will have control of the JVC's board (as most board resolutions will require simple majority approval).
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