Shareholder wins dispute after being excluded from company

Published: 26 January 2018

Category: News

An accountant who was the minority shareholder in a business has won his claim for a financial settlement after being excluded from company affairs.

The accountant had a 49% shareholding in the company; the majority shareholders were a designer and his wife who held the remaining 51%.

The company made model military figures for a specialised market. The accountant claimed that since he had become a shareholder in 1999, they operated as a quasi-partnership, and that he had effectively been running the business because of the designer’s ill-health.

However, he was then excluded from company affairs and removed as a director. He alleged that the company's affairs had been conducted in a manner unfairly prejudicial to his interests.

He argued that the designer should buy out his shares at their value on the date he was excluded.

The designer and his wife claimed that the company was not a quasi-partnership, and that the accountant had voluntarily retired from day-to-day management of the business and had no entitlement to remain as a director.

They said that any order for the sale of his shares should value them as at the date of the court order as they had reduced in value.

The court found in favour of the accountant.

It held that he had not been taken on as an employee; a scheme had formed for the joint running of the business for mutual benefit based on each shareholder’s trust and confidence in each other.

The removal of the accountant from the business had been unfair. It was appropriate therefore that the "association should be dissolved" by an order that his shares be purchased by the designer and his wife at their higher value on the day of his expulsion.

Please contact Phil Downing in our Business, Corporate & Commercial Property Team if you would like more information about the issues raised in this article or any aspect of company law.