Unfair Prejudice Claims in London, Birmingham and Northampton

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Our commercial lawyers excel at helping clients with unfair prejudice claims. With a wealth of experience under our belts, we have honed the skills to help you achieve the best possible outcome whilst avoiding expensive litigation.

To get legal advice on unfair prejudice claims, send an email to info@witansolicitors.co.uk. Our team will be more than happy to arrange an initial no-obligation consultation with one of our legal specialists in Birmingham, London or Northampton.

What is Unfair Prejudice?

As the name suggests, unfair prejudice refers to conduct that is unfair and prejudicial to one or more shareholders.

Examples of Unfair Prejudice

Unfair prejudice claims will usually fall into one of two categories:

• Manipulation of company assets or finances – Be its inappropriate use of company assets for the majority shareholder’s personal gain, diversion of business to other companies, share dilution or even refusing shareholder dividends
• Withholding information – In cases where there is no shareholders’ agreement or the articles of association have not been amended, minority shareholders may not have the right to access company records or accounts. This means that the majority shareholder has a monopoly on key information

Other examples of unfair prejudice include:

• Acting in breach of the article of association
• Awarding directors in excess
• Mismanaging the company or assets
• Devaluing shares
• Excluding a shareholder from the management of the company

Claiming unfair prejudice can be even more challenging without knowledge of what is actually going on. However, our legal experts will guide you through the process.

Our Services

As with any other legal dispute, it is crucial to find the most cost-effective solution. We understand that litigation is not always the most appropriate solution, especially in cases where there is no clear evidence that the director has breached their fiduciary duty or there are no strong protections for minority shareholders in the shareholders’ agreement or standard articles. 

Plus, litigation can be time-consuming and expensive. That is why our solicitors always provide our clients with practical and honest legal advice, helping them reach a settlement in no time.

On top of this, we have a wealth of experience handling shareholder and partnership disputes, helping directors, shareholders and partners find a peaceful solution. If you feel that your interests are being undermined or damaged, we will help you protect your rights.

To ensure that there is still value left in the business, it is important to act quickly and seek legal advice from experts like us.

Section 994 Legal Test

To take legal action for activities that are considered to be unfairly prejudicial, you will need to meet the requirements in Section 994 of the Companies Act. Two of the most important requirements claims will need to prove are:

• Unfairness – The courts will assess the context and carry out an objective assessment to determine unfairness. Factors such as whether the company is family-owned, the size, how shareholders have run the company historically and whether a shareholders’ agreement exists will be taken into account to determine whether the alleged action is unfair
• Prejudice – The claimant will need to show clear detriment, such as a reduction in the value of the shares. It is important to note that prejudicial impact is not just limited to financial loss

Who Can Make an Unfair Prejudice Claim?

Section 994 of the Companies Act 2006 allows any minority shareholder of a company to bring a claim against a majority shareholder if they are or have acted in a way that is unfairly prejudicial to the interests of the minority shareholders.

Directors or shareholders who have acted unfairly or prejudicially will be named defendants to the petition. As their actions were for their own benefit, they will not have limited liability protection. The company itself may also be named as a defendant so that the business owner is aware of the court proceedings.

How to Prove Unfair Prejudice

To prove unfair prejudice, claimants need to show that the alleged activity relates to the running of the company and has an impact on a section of the shareholders or shareholders generally. It is worth noting that the claimant must be one of the shareholders affected by the unfair activity.

While a shareholder who has specifically been disadvantaged compared to other shareholders may have a stronger claim than one who has been disadvantaged generally, it is still worth bringing an unfair prejudice petition.

As there are no hard and fast rules regarding what types of action or inaction are prejudicial, claimants must simply demonstrate that the activity prejudiced their position as a shareholder. For claims to succeed, evidence is essential. Claims must be based on facts as opposed to how directors made claimants feel or have treated them in relation to something that is not connected to the shares.

What Remedies Are Available?

There are a variety of remedies set out in section 996 of the Companies Act 2006. While most claims are resolved through a negotiated settlement, share purchase orders are common remedies in this type of court proceeding. This is where one party is ordered to buy the other party’s shares. The court may also make orders that set out what shareholders and/or the company should do to resolve the issue.

Other remedies include:

• Claiming for ‘just and equitable winding-up’ which can be pursued in accordance with s.122(1)(g) of the Insolvency Act 1986
• Making a derivative claim against the company in accordance with sections 260-264 of the Companies Act 2006

Shareholder and Partnership Disputes

While both shareholders and partners have partial ownership of a business, there are key differences between the two. For instance, partners divide ownership of the business between other partners and are involved in the day-to-day operations. Shareholders, on the other hand, buy partial ownership through shares and do not usually have management responsibilities.

The Companies Act 2006 sets out the statutory rights and protections of shareholders. However, in some cases, these rights are treated poorly or completely disregarded. Shareholder agreements help to eliminate any uncertainties and set out how disputes should be resolved if they arise.

Like shareholders, partners can also suffer unfair prejudice. If a partnership agreement does not exist, the company will automatically be subject to the Partnership Act 1890. As ordinary partners share in profits and liability equally, ending the partnership requires the business to be dissolved completely. This can be costly and time-consuming.

Limited partnerships and limited liability partnerships (LLPs) have the same protections as shareholders in limited companies. This means that partners have rights to remedies included in the Partnership Act 1890 and the Companies Act 2006.

If you are dealing with a partnership dispute, we can help you understand what your options are and find an appropriate solution.

Types of Conflict We Can Help With

Our legal experts specialise in dealing with disputes that arise as a result of shareholders, directors or partners:

• Not upholding their end of the agreement
• Doing something they should not be doing
• Pressuring another party
• Not agreeing to another party exiting
• Unlawfully removing assets from a company or special purchase vehicle (SPV)

Whether you need to recover assets, ensure you are well-positioned during negotiations, or simply need discreet advice on your rights, we will help you figure out your next steps. 

Why Choose Witan Solicitors?

We have made a name for ourselves as industry experts in our field and have been recognised by the Legal 500 for our strong commercial acumen and legal expertise. So, it is easy to see why our law firm is the top choice for those looking for advice on unfair prejudice petitions in the UK. We excel at finding the best way to put pressure on majority shareholders and improving the position of claimants. As our client, you will access the benefits below. 

• More than 100 years of legal experience on the team
• Honest, jargon-free legal advice
• Strong commercial awareness
• Proven record of successfully helping high-profile businesses 
• Advice on unfair prejudice claims in Birmingham, London and Northampton