The petitioner was a minority shareholder. He claimed an order that the majority shareholders sell their shares to him. An administrative receiver was then appointed. The claim changed to an order that an order that the majority shareholders buy his shares.
Held: There had been oppressive conduct, but the buyout order was refused. Richard Sykes QC said that the relief ‘need not be directed solely towards remedying the particular things that have happened’, but: ‘The fact is that the appointment of an administrative receiver has enabled the company to be properly run, so far as it is running at all, and there is no necessity to appoint anyone to supervise the operations of the administrative receivers, if anybody could be found to perform that task gratuitously.
Paradoxically, the appointment means that there now is no order which is appropriate for giving relief in respect of the matters complained of. I certainly take the view that sec 461(1) requires me to consider what order is appropriate at the time of the hearing and not, for example, what order would have been appropriate at the date of presentation of the petition.
It is very common that the order made on petitions under sec 459 is for one warring faction to purchase the shares of the other. In the case of a company which is continuing in business it certainly gives relief in respect of the matters complained of. The petitioner is no longer the bedfellow of the wrongdoer; he is either in control of the company because he has bought the wrongdoer’s shares or he is free from the company for a fair price, often adjusted for the damage done to the company by the wrongdoer. Such relief might well have been appropriate in the present case at the date of the presentation of the petition and so long as it continued as a going concern. To impose on some of the respondents an obligation to purchase the petitioner’s shares in the events which have happened is tantamount to imposing a fine on them: there is nothing of any value for them to purchase. Nor does the petitioner need to dispose of his shares in order to obtain relief in respect of the matters complained of: the administrative receiver has provided that relief.’
The buy-out order would be appropriate if the oppression had prevented the petitioner from selling his shares at a proper price prior to the onset of insolvency, but there was no evidence of that; and that it might have been appropriate if the buy-out order had been originally sought when the company was solvent, although that appears to be contrary to considering what order is appropriate at the time of the hearing. These possible qualifications do not detract from his Lordship’s central reasoning.
Richard Sykes QC
[1993] BCLC 459, (1992) BCC 542
England and Wales
Cited by:
Cited – Clark v Cutland CA 18-Jun-2003
One director discovered that his co-director had withdrawn substantial sums from the company. . .
Lists of cited by and citing cases may be incomplete.
Updated: 12 September 2021; Ref: scu.258600