Two shareholders held more than 90% of the issued shares of the company. To get rid of the holder of the remaining shares, they incorporated another company for the purpose of acquiring all the shares of the company. The acquiring company offered to purchase the company’s shares at a proper value. The majority shareholders accepted the offer but it was refused by the minority shareholder. The acquiring company gave notice of intention to exercise the statutory power of compulsory acquisition under the section. The minority shareholder applied that the transferee company was neither entitled nor bound to acquire his shares on the terms offered notwithstanding the approval of 9/10ths of the shareholders. The minority said the offer undervalued his shares. The majority shareholders did not file any evidence verifying their valuation.
Held: The court made the declarations sought. In circumstances where the assenting 90% majority were unconnected with the offeror the normal burden of proof rested on the dissenting minority to show grounds why the court should ‘order otherwise’, but that did not apply where there was a connection between the assenting majority and the offeror, in particular, where the acquiring company was simply the alter ego of the assenting majority. As to a submission that the respondent’s use of section 209 was contrary to the purpose of the section: ‘I am bound to say that I see very great force in that argument. Whether, in such a case, if the court were fully satisfied that the price offered to the minority shareholders was a fair price to be offered for their shares, the section ought to be allowed to operate according to its tenor is, I think, a matter which it is unnecessary for me to decide today because, in my view, on the facts of this particular case, at any rate, the onus must rest on Mr Instone’s clients [the majority shareholders] to satisfy the court that the price offered is a fair price. In the ordinary case of an offer under this section, where the 90 % majority who accept the offer are unconnected with the persons who are concerned with making the offer, the court pays the greatest attention to the views of that majority.
This case, however, seems to me to be quite the reverse of that, because here, although as a matter of law the body making the offer must be regarded as distinct from the persons who hold shares in that body, nevertheless as a matter of substance the persons who are putting forward this offer are the majority shareholdersIn a case of this kind it seems to me that the onus must clearly be on the other side, and that it must be incumbent on the majority shareholders to satisfy the court that the scheme is one with which the minority shareholder ought reasonably to be compelled to fall in with.’ The acquiring company had not discharged that burden.
Judges: Buckley J
Statutes: Companies Act 1948 209
References:  Ch 270,
- Re Bugle Press Ltd, CA, Appeal from, ( Ch 270)
- In the Matter of British American Racing (Holdings) Limited; In the Matter of the Insolvency Act 1986, ChD, Cited, ( EWHC 2947 (Ch))