Unfair Prejudice Petitions

An unfair prejudice petition is a remedy that may be available to shareholders who believe they have been treated unfairly in how a company’s affairs are being run. If you are a shareholder of a company and believe that you have been subject to unfairly prejudicial conduct, the expert commercial litigation solicitors at JMW can help you to resolve your dispute and, if necessary, present an unfair prejudice petition to the court on your behalf.

Unfair prejudice petitions comprise the main protection for minority shareholders under company law in England and Wales, and our team understands the significant financial consequences that can arise when shareholders become embroiled in a dispute. JMW’s experienced solicitors will help you understand your rights and bring a petition to rectify or prevent further anticipated unfair prejudice. 

Where possible, we will work to settle shareholder disputes on a commercial basis through alternative dispute resolution. However, we can support you to achieve the full range of statutory remedies and will pursue a positive outcome through litigation where necessary.
To discuss a potential unfair prejudice petition, simply call us on 0345 872 6666, or complete our online enquiry form to request a call back at a convenient time.

How JMW Can Help

JMW's commercial litigation team is led by renowned solicitor Steve Morris and is one of the largest teams in the North West. With a wealth of experience advising shareholders and other commercial clients throughout the UK and a strong track record of success, we can help those who have been unfairly prejudiced to seek an appropriate remedy in the most efficient and cost-effective way possible.

We frequently advise shareholders on resolving a range of disputes, including our  specialism in unfair prejudice claims. Our expert solicitors understand the impact that unfair treatment by majority shareholders, company directors or others can have, and the statutory remedies available to you. When you get in touch, JMW's team will discuss your situation and determine the best course of action to deliver the objective you wish to achieve, whether that involves making an unfair prejudice petition or exploring any other remedies available to you.

We always endeavour to settle a dispute with the best available outcome for you, whether through informal settlement discussions, alternative dispute resolution methods like mediation or negotiation, or in court where necessary. While the court can make such orders as it deems appropriate in these cases, we will work to understand your desired outcomes and approach the processes with these as our ultimate aim.

Meet Our Commercial Litigation Team

The unfair prejudice petitions team at JMW provides expert guidance and tailored solutions to resolve shareholder disputes. Our longstanding experience and reputation in this area mean that we can work to show why certain conduct should be deemed unfair by the court and deliver a suitable remedy on your behalf.

Case Studies

What is an Unfair Prejudice Petition?

When parties first go into business together, they do not always consider the importance of a well drafted Articles of Association and shareholders’ agreement. This means that they do not make provisions for what will happen if relations sour. 

In the absence of an express agreement to the contrary, the rights of shareholders can be quite limited, particularly in the case of minority shareholders. An unfair prejudice petition enables minority shareholders to take action, and the team at JMW can support you to pursue matters through the court where necessary.

Section 994 of the Companies Act 2006 provides a statutory procedure whereby a shareholder (whether minority or majority) can petition the court for assistance in the event that a company’s affairs are being conducted in a manner that is ‘unfairly prejudicial’ to one or other shareholders within the company. This includes not only current actions, but proposed acts and future conduct that is likely to prejudice a particular shareholder or group of fellow shareholders.

An unfair prejudice claim allows a shareholder to explain to the court why the way that the company is being managed is unfairly harming their interests, and seek an appropriate remedy. At JMW, our commercial litigation team can advise you on whether you are in a position to make a claim, and support you through the legal process of filing your petition with the court.

What Are Common Examples of Unfair Prejudice?

Whether or not unfair prejudice has taken place will be determined by the court. Examples of potential unfair prejudice where you may be able to make a claim include:

• The misappropriation of company funds or assets by one or more directors
• Breaches of directors’ duties by one or more directors
• Breaches of any shareholders’ agreement, the company’s Articles of Association or any statutory provisions
• A shareholder’s exclusion from management when having originally been a director, whether by formal removal as a director or otherwise
• Payment of excessive remuneration by directors, often combined with a failure to declare dividends
• The allotment of additional shares to dilute minority shareholdings

The court uses the standard of whether a reasonable person would consider the conduct unfair to the petitioning shareholder to determine whether conduct complained of is ‘unfairly prejudicial’. The court will have regard to all the circumstances in making its determinisation including whether or not an act complained of is expressly permitted by a shareholders' agreement or some other agreement that applies.

What Must a Shareholder Prove to Bring an Unfair Prejudice Claim?

In order to successfully bring a petition for unfair prejudice, you will need to satisfy the requirements in section 994 of the Companies Act. You will need to establish both unfairness and prejudice in the context of your interest as a shareholder:

1. The court will look at the background and context and apply an objective test to decide whether the conduct complained of is unfair and prejudicial. This will likely involve considering the size and type of the business, the performance history of shareholders, any change to the management of the company and any shareholders' agreements in place.
2. The petitioner will need to show a substantial and tangible detriment to prove prejudice. This can include a reduction in the value of your shares, but is not necessarily limited to financial loss.

The team at JMW can help you to gather evidence and support your unfair prejudice claim. From the outset, we will advise you of whether civil proceedings are likely to be an option based on the conduct you have experienced, and work to make the strongest possible case before the court to deliver the remedy you are owed.

What Powers Does the Court Have?

If a court concludes that unfair prejudice has taken place, it has various powers at its disposal. The most common remedy is for the court to issue a ‘purchase order’. This demands that the other shareholders purchase the petitioner's shares for an amount that the court considers "fair value".

However, the court has a wide discretion in these cases and is not bound to order the petitioning party to have its shares bought out. Particularly where the court deems that a purchase order would be disproportionate to the prejudice experienced by the petitioner, it may take other steps instead.

In fact, the court can make any order that it considers appropriate. This could include:

• orders regulating the management of the company
•  orders requiring the company to do, or refrain from doing, a particular act.
• an order or injunction to address misconduct and protect company assets, by, for example, preventing the diversion of company funds.

Speak to the team at JMW for advice on the possible outcomes based on your circumstances, and we can guide you on pursuing the resolution you wish to achieve.