This is quite an interesting link on unfair prejudice
http://www.ashfords.co.uk/guide-to-unfair-prejudice-against-shareholders-(1)/
Types of unfair prejudice
Test of Unfairness
The test as to what amounts to unfair prejudice is objective. It is not necessary for the petitioning shareholder to show that anybody acted in bad faith or with the intention of causing prejudice. The courts will regard the prejudice as unfair if a hypothetical reasonable bystander would believe it to be unfair.
Fairness is judged in the context of a commercial relationship, the contractual terms of which are, in the main, set out in the Articles of Association of the company and in any shareholders agreement. The starting point is therefore to ask whether the conduct of which the shareholder complains is in accordance with the Articles and the powers which the shareholders have entrusted to the board. In a Law Commission report it was said that "The best protection for a shareholder is appropriate protection in the articles themselves". Therefore, if the conduct is in accordance with the Articles, to which the shareholder has agreed, it will be more difficult to succeed with an unfair prejudice petition.
Even if the conduct is not in accordance with the Articles, it does not necessarily render the conduct unfair, as trivial or technical infringements of the Articles may not give rise to a remedy under s.994.
The Rights/Interests of the Shareholder must have been Prejudiced
The conduct must be unfairly prejudicial to the Petitioner's interests in his capacity as a member of the Company (i.e. as a shareholder), but the Court takes a broad view of what might be regarded as his interests as a member of the Company.
The word "unfairly" enables the Court to consider wider equitable considerations and recognises that the members have rights and expectations which are not necessarily included in the Articles of Association. For example, a member's interest may arise out of an agreement that some or all members should participate in the management of the Company. A member's interest is not, therefore, limited to his strict legal rights, but can extend to legitimate expectations arising from the nature of the Company and agreements and understandings between the parties. A common example of this is the corporate "quasi-partnership", in which members may have expectations of participating in the management and profits of the Company, which arise from the understandings on which the Company was formed and which may be unfair for other members to ignore.
Apart from in the case of "quasi-partnerships", it is more difficult to establish legitimate expectations beyond the member's strict legal rights. If such expectations exist, a Petitioner must in general show some abuse by the directors of their powers, or an infringement of the member's strict legal rights under the Company's constitution or the Company's legislation.
Types of unfairly Prejudicial Conduct
"Unfair prejudice is a flexible concept, and incapable of exhaustive definition. The categories of conduct which may amount to unfairly prejudicial conduct are not closed. However, common examples of what may constitute unfairly prejudicial conduct are:
exclusion from management in circumstances where there is a (legitimate) expectation of participation;
the diversion of business to another company in which the majority shareholder holds an interest;
the awarding by the majority shareholder to himself of excessive financial benefits; and
abuses of power and breaches of the Articles of Association. For example, the passing of a special resolution to alter the Company's Articles may be unfairly prejudicial conduct if such alterations would affect the Petitioner's legitimate expectation that he would participate in the management of the Company. Also, repeated failures to hold AGMs; delaying accounts, and depriving the members of their right to know the state of the Company's affairs may all be unfairly prejudicial to a member's interests.The conduct of the Petitioner is relevant, as the conduct complained of may be found to be prejudicial but not "unfair". The Petitioner's conduct may also affect the relief granted by the Court."
Presumably the Trust being excluded from appointment of COO (I.e. Management) would be an example of unfair prejudice.
Chances of success
'In general terms, the Courts have, over recent years, restricted the extent to which relief is given for unfair prejudice. The Petitioner must therefore normally prove an actual breach of terms that have been agreed as to how the Company will be run, or show that such terms were being used in a way which offends equitable considerations.'
However that shouldn't. be too difficult to prove in regards of Huw Jenkins instructing his lawyers to contact the Trust 2 days before the sale - to negotiate away the original shareholders agreement.
Remedies are very interesting..............
Remedies Available
Section 996 of the Companies Act 2006(2) lists particular types of orders which may be made by the Court if it decides that there has been unfair prejudice, although the Court retains a general discretion under Section 996(1) to make any order it thinks fit. The powers listed in 996(2) provide that the Court can:
regulate the conduct of the Company's affairs in the future;
require the Company to refrain from doing or continuing an act complained of, or to do an act which the Petitioner has complained that it has omitted to do;
authorise civil proceedings to be brought in the name and on behalf of the Company by such person/s and on such terms as the Court may direct;
require the Company not to make any, or any specified, alterations in its articles without the leave of the court; and
provide for the purchase of the shares of any members of the Company by other members or by the Company itself and, in the case of the purchase by the Company itself, the reduction of the Company's capital accordingly.
So very interesting you can change the articles back!!!! That would set the cat amongst the pigeons. The Yanks business model will depend on being at some time to leverage the assets of the club. If they can't change the articles going to sue the ex shareholders under the warranty to recoup value lost. Especially if in good faith Huw Jenkins told them there was no original shareholders agreement.
The other nice one is to regulate the company's affairs. They are really going to like that one. Will depend for me that one on having a totally indepedent Director - with no perceived baggage.
My preferred remedy is the other one where court decides an outright purchase of the shares. (Not everyone's I know). Really fear for Huw Jenkins, Martin Morgan and Leigh Dineen if court does decide in Trusts favour that Trust has been unfairly prejudiced - their reputations would be in tatters with whole fan base and throughout Swansea and Wales.
I am fearful of a perfect storm for them - relegation and courts deciding they have been unfairly prejudicial against the Trust. God help them (and I am an atheist). |  |
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