Re Motion Picture Capital Ltd [2021] EWHC 2504 (Ch)

Facts

  • The case examined the scope of section 994 of the Companies Act 2006, which allows shareholders to challenge unfairly prejudicial conduct affecting their rights as members.
  • Section 994 permits a court to provide remedies where a company's actions have unjustly damaged the interests of its members.
  • Any company member, as listed in the company’s register of shareholders, can apply under section 994.
  • The status of those holding shares through lawful transfers, such as inheritance or bankruptcy, and beneficial owners whose shares are held by nominees, was considered.
  • The decision considered the requisite proof for establishing both harm and unfair conduct for a successful petition.

Issues

  1. Who qualifies as a "member" eligible to bring an unfair prejudice petition under section 994 of the Companies Act 2006?
  2. Whether beneficial owners with shares registered in nominees’ names can claim under section 994.
  3. What degree of harm and unfairness claimants must prove to succeed in an unfair prejudice petition.
  4. What remedies the court may grant under section 996 in cases of unfair prejudice.

Decision

  • The court affirmed that a "member" is an individual recorded in the company's register of shareholders, and this registration is required to bring a claim under section 994.
  • Beneficial owners may in certain circumstances bring a claim, particularly if the nominee (legal owner) joins as a party.
  • Share transferees by lawful means, including inheritance or bankruptcy, retain the right to petition for relief under section 994.
  • Claimants must prove they suffered harm as members and that the conduct in question was unfair, based on breached reasonable expectations or improper conduct.
  • The court possesses broad powers under section 996, including regulating company conduct, ordering share purchases, and permitting derivative claims.

Legal Principles

  • A "member" eligible under section 994 must be listed in the company's official register; beneficial interests alone are insufficient without specific circumstances.
  • Registration as a shareholder is essential for standing, as established in cases such as Re a Company (No. 005287 of 1986) [1987] BCLC 94.
  • Beneficial owners may have standing if nominees are involved in the proceedings; Gamlestaden Fastigheter AB v Baltic Partners Ltd [2007] UKPC 26 considered this point.
  • Lawful transferees are afforded equal rights under section 994, as in Re a Company (No. 004415 of 1986) [1986] BCLC 376.
  • The test for unfair prejudice is whether a member has suffered injury due to conduct conflicting with reasonable expectations, per O'Neill v Phillips [1999] 1 WLR 1092.
  • Common instances of unfair prejudice include exclusion from management in quasi-partnerships, misappropriation of company assets, and directors' breach of duties, as illustrated in Ebrahimi v Westbourne Galleries Ltd [1973] AC 360.
  • Remedies include orders regulating conduct, requiring share purchases, and permitting derivative actions under section 996.

Conclusion

The case clarifies that only registered company members, including lawful transferees, may bring unfair prejudice petitions under section 994 of the Companies Act 2006, while beneficial owners may participate under certain conditions. Successful petitioners must evidence both injury and unfair conduct, with courts empowered to impose extensive remedies to protect shareholder rights.

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