Shareholder Disputes in Sport
As the law of unfair prejudice in the conduct of companies’ affairs has developed, sports clubs (particularly football and rugby clubs) have proved to be fertile sources of disputes between shareholders. In this article, we examine unfair prejudice petitions which have concerned the sports sector to look at the effects of those decisions and at what we can learn not just about the sorts of shareholder disputes which arise in sports clubs but also what we can learn from those decisions and apply to shareholder disputes in other contexts.
Nuneaton Borough AFC: what remedial powers does the Court have in its locker?
It was shortly after s.459 Companies Act 1985 came into force (now replaced by s.994 Companies Act 2006) that football began to play its part in the development of law on the applicability of that section. The shareholders in Nuneaton Borough Association Football Club Ltd had a spectacular fall out when the chairman, who was also a shareholder, interpreted the conduct of another shareholder director (who subsequently became the petitioner) in trying to acquire further shares as an attempt to gain board control and thereby oust him. The case came about in circumstances where there had been failures to comply with rotation and re-election provisions in the Articles of Association, and as the judge described it:
“This present case is of repeated failure – year over year over year – to hold annual general meetings or to lay accounts before members, so that members were wholly deprived of any opportunity to consider the affairs of the company, to vote upon the election or re-election of directors, or in any other way to know what was going on. As it seems to me, that conduct – not the absence of filing but the conduct in depriving members of their right to know and consider the state of the company and its directorships, and to ask questions of the directors – is conduct which, inevitably, must be prejudicial to the interests of members.”
The judge held that the petitioning shareholder was entitled to a remedy and he approved the submission made to him that “nothing could be more undesirable for this football club than to have its board of directors in open dissention” (though as a matter of law he went on to hold on the facts and law that there was no properly constituted board at all).
That was all back in 1987, a time when many sports clubs and those managing them did not have the sort of legal resources at their disposal that some clubs do today, and it is to be hoped that no chairman of such a club would now have it said of them what the judge said of the chairman in that case:
“[The chairman] who I entirely accept has no business to be learned in company law, was so unlearned in company law that he did not even realise that his holding of the majority of the shares of the company would provide him with ordinary control in all circumstances…”.
The remedy, which the judge ordered under s.459 Companies Act 1985 (now s.996 Companies Act 2006), was the purchase of shares, though not the purchase of the minority shareholders shares as is the usual case where buy-out orders are made, but the forced sale of the other shares in the company to the minority shareholder who had presented the petition. In an important statement on the width of discretion that a court has in formulating appropriate relief when unfair prejudice has been established, the judge said:
“In my view, there is power here to make such orders as I consider will enable the company, for the future, to be properly run, and for its affairs to be under the conduct of somebody in whom the shareholders generally can have confidence that the company will be properly conducted” and ordered that the chairman who had “demonstrated, regrettably, that he is unfit to exercise such control in law, although not for any reasons of bad faith” to sell his shares to the petitioner.
The important question which followed from the share purchase order made by the judge was how to value the shares in a football club. The judge noted that in ordering the chairman to sell his shares “if he was ordered to sell them at commercial value, [his shares] would fetch almost nothing but, nonetheless, undoubtedly [the shares] have a real value to people who want them, far beyond their commercial value”. Unlike the vast majority of private companies which come before the court to determine the value of their shares, the judge said in this case (and bearing in mind this was 30 years ago):
“…shares in a football club cannot be properly valued by the application of accountants’ techniques. Shares in football club companies have a value which has nothing to do with commerce…they are not valued on dividend stream, and they are not valued on asset values. They are only to be valued for reasons of the prestige, I think this is the proper word, in the eyes of the local community which chairmanship or membership of a board of directors of a well-known football club does, in fact, confer.”
The judge also identified that he needed to ensure that his order was “fair” to the chairman, and that the terms must enable him (and a company owned by him) to recover the very substantial sums of money which they had advanced. When the matter came back to the court for determination of the price to be paid for the shares, the judge went further, stating that “it seems to me that it would be a grave injustice in the ordinary sense of the word to force [the chairman] to give up his interest in the company but allow the company to keep monies paid to it by [the chairman] because of that interest”.
When it came to fixing the price to be paid for the shares in the football club, the judge did not find any assistance in the points made by the chairman about alleged transactions of which he could give no direct evidence “at Newcastle FC, which I think I am allowed to know was at one time a leading first division club though not at present, and an abortive alleged offer for shares in Manchester United FC, a very famous name in football” any more than he did in the submissions that there was “a possibility of a redevelopment of the company’s ground and the chances of a substantial value being realised.” In an article in this series entitled “Share Valuation in Shareholder Disputes” Hugh Jory QC and Matthew Bradley consider the art of share valuation in more detail.
Leeds United: what constitutes unfair prejudice and are there grounds for striking out unfair prejudice petitions?
It was not long (at least in company law terms) before another football club company was the subject of an unfair prejudice petition, Leeds United. The brief background to that case was that three long-standing supporters of the club had been directors since around 1980, they managed various aspects of the club as a private company and two of them guaranteed its bank overdraft. As part of a restructuring a new public company, Leeds United Holdings Plc was set up in 1995 to acquire the club, and its shares were held by those individuals and companies controlled by each of them respectively. The intention behind the public company was to improve its creditworthiness and to facilitate a possible flotation to attract further investment. As part of the restructuring there had been talk of including pre-emption rights, but nothing in that regard found its way into the documentation.
It was not long before one of the director/shareholders (Mr Gilman) complained that decisions about negotiation of the manager’s contract and terms for the acquisition of new players were being conducted without reference to him; and he also objected to the fact that one of the other directors had stood down as chairman in favour of appointing the other to that role without Mr Gilman being consulted. He also discovered that one of the other shareholders had been negotiating with Caspian Plc (“Caspian”) to give that company an option to acquire his shares in Leeds United Holdings Plc, which Mr Gilman considered to breach the understanding, albeit not enshrined in a written shareholders’ agreement, that the shareholders would enjoy pre-emption rights in respect of the other shareholders’ shares.
Mr Gilman’s company, which owned shares in Leeds United, presented a petition claiming unfair prejudice in the management of the affairs of the company; and when the proceedings came before the judge he referred to them as arising from “an unfortunate dispute between directors of the company…which is causing considerable damage to the morale of the Club”.
The judge was quick to identify the motive for Mr Gilman’s petition, namely a potential acquisition by Caspian, which the judge said “it is clearly Mr Gilman’s object, by this petition, to prevent coming to fruition.” There were two potential purchasers for the shares: Conrad Plc, which made an offer to purchase all of the shares in the company at £1 each, and Caspian which made a more complex offer on two alternative bases. Both offers were considered by the board along with a third offer. Whilst Mr Gilman favoured the Conrad Plc offer, the other directors/shareholders preferred that from Caspian and accordingly the majority of the board voted to recommend that Caspian’s offer be accepted. Mr Gilman sought an injunction to stop the others from selling their shares to Caspian and to stop the company from allotting any shares to Caspian. The other shareholders applied to strike out his petition altogether and so defeat any grounds for an interim injunction.
As for the petitioner’s complaints about the buying of players and renegotiation of the manager’s contract without consultation with Mr Gilman, the judge held that “those complaints relate to acts carried out, not in the management of the company at all, but in relation to the management of the Club”. Whether that sort of distinction would survive today seems rather doubtful. The terms on which the company engages players and managers are very important considerations; and it is also now established for example that a company’s affairs can include the management of its subsidiary companies (see the Neath Rugby Club case dealt with below). Be that as it may, the real issue before the judge concerned the assertion that the company was a quasi-partnership and whether there was a “legitimate expectation” which could give rise to the creation of rights of pre-emption in relation to the shares in the company (there having been no express agreement to such rights between the shareholders in this case). In an article in this series entitled “Recent Developments in Quasi-Partnerships” Thomas Ogden and John Williams look in more detail at that area of law.
The judge was concerned with pre-emption rights in the context of a public company and may in fact have been overstating the chances of pre-emption rights arising outside a company’s constitution in such situations, when he described them as “rare”. As he noted, if some legitimate expectation that the shareholders would not sell their shares without the petitioner’s consent were to have existed, then they would have given rise to disclosure obligations, including in the offer documents; and the fact that they were not would of itself have, in his judgment, have justified dismissal of the petition. However, his further reason for striking out the petition is of more general importance to this area of the law:
“An expectation that a shareholder will not sell his shares without the consent of some other or other shareholders does not relate in any way to the conduct of the company’s affairs and therefore, cannot, in my judgment, fall to be protected by the court under s.[994 Companies Act 2006].”
This is a crucial consideration when considering any case for unfair prejudice, namely, the distinction between:
- the conduct of the company’s affairs, which can give rise to unfair prejudice within s.994 CA 2006; and
- the agreements or understandings between the shareholders themselves in relation to their individual shareholdings, which cannot give rise to unfair prejudice within s.994 CA 2006.
Put simply, who owns the shares in the company itself is not within the scope of management of its affairs. Rather, those are the personal affairs of the shareholders concerned.
As for the gist of Mr Gilman’s complaint, namely that the board had recommended Caspian’s offer rather than Conrad Plc’s, the judge concluded that:
“It cannot be said that the board is conducting the company’s affairs in a manner unfairly prejudicial to the petitioner by exercising judgment as to which of two offers for the company’s shares should be recommended to shareholders”
This is an important distinction, which requires to be analysed when considering whether there has been unfair prejudice, between:
- matters of commercial judgment, which are for the directors to exercise in good faith to promote the interests of the company accordance with the duties of care and skill, but which they can and will get wrong from time to time (for example, when markets move differently to the way they anticipated); and
- the actions by the directors, which are tainted by or with some breach of duty to the company on their part, such as conflicts of interest/abuse of fiduciary position.
Cases involving matters of commercial judgment falling within the first category are unlikely to give a disgruntled shareholder a remedy for unfair prejudice as it is very difficult to say that what transpires to be an error of judgment in good faith is ‘unfair’ to a shareholder. One of the risks shareholders take in investing in a company relates to the ability of the management to get their judgments right – and directors do not warrant to shareholders that they will always do so.
By contrast, cases falling within the latter category (where there has been a breach of the understanding that the directors will conduct the affairs of the company lawfully in accordance with their duties) are likely to be more straightforward for the petitioner and are likely to give a disgruntled shareholder a remedy for unfair prejudice as can be seen, for example, in a recent unfair prejudice petition concerning Blackpool FC (another football club) discussed in more detail below.
The final reason why the petition in the Leeds United case was struck out by the judge is also important in the development of the law in this area, namely abuse of process. The judge was satisfied that Mr Gilman was not in fact pursuing the petition to protect himself (as the petitioner) against any unfair prejudice as contemplated by the relevant section of statute (then s.459 CA 1985), but to make the Caspian bid impossible. The judge ordered that it was accordingly “an abuse of process of the court and [the petition] should be struck out now so as to limit the most unfortunate damage that this has already caused to the welfare of Leeds United Football Club, and therefore, the company.” Despite that noble aim of the judge, and for reasons he would not have been able to foresee, history tells us now that the fortunes of that great club were in for a turbulent time over the coming years.
Blackpool FC: disguised dividends and unfair prejudice
Staying with football clubs for now, it has been Blackpool FC which has recently found itself the subject of an unfair prejudice petition. In short, the relevant background to this unfortunate case was disharmony connected with what the judge described as “this vast influx of cash”. This influx of cash referred to payments of just under £123 million, including £42 million received during one season in the Premier League (2010-2011) together with parachute payments in respect of the seasons 2011-2012 to 2014-2015 (to cushion difficulties that clubs experience when relegated from the Premier League).
The petitioning shareholder, VB Football Assets, which had acquired a 20% stake in the company under its subscription agreement, complained of unfair prejudice in three particular respects:
- That substantial payments made out of Blackpool FC had been for improper purposes, namely for the personal benefit of Mr Owen Oyston and/or his son Mr Karl Oyston (director and chairman of Blackpool FC) who controlled a company owning just over 76% of the shares of Blackpool FC following its subscription agreement (the judge referred to those interests as “the Oyston Side”) and without the petitioner’s consent; and closely related to that, there had been a failure to pay dividends; and
- That VB Football Assets was excluded from management of Blackpool FC because although certain individuals connected with VB Football Assets were directors of Blackpool FC, they were excluded from receiving material information about the company including information needed for board meetings; and that decisions which ought to have been made at board meetings were being made outside them; and
- Blackpool FC had adopted new articles of association unfairly prejudicial to them.
The significance of a finding of disguised or concealed dividends arises from the fact that absent a lawful return of capital, payments to a shareholder other than properly arising from approved remuneration for actual services as a director/employee will be unlawful unless they are properly declared dividends in accordance with company law; and properly declared dividends entitle shareholders of the same class of shares to the same dividend per share. The disguised or concealed dividend is where there has been in effect a return of capital, but outside the proper process for declaring dividends and probably to benefit one shareholder at the expense of another (who would have been entitled to be treated equally had a lawful dividend been declared).
The Blackpool FC case illustrates how understandings arising outside documented agreements can adversely affect the relationship between the shareholders and breaches of such understandings can give rise to unfairly prejudicial conduct. In this case, whereas the petitioner’s holding was 20% of the shares in the company, because of what the petitioner described as a ‘gentleman’s agreement’ that the petitioner would have equal control over the company, the petitioner valued that shareholding as if it constituted 48.145% (i.e. so that the Oyston Side and the petitioner each held a notional equal share of the Oyston Side holding (76.29%) plus the petitioner’s holding (20%) i.e. half of 96.29%). There is more detailed analysis of the particular approach to valuation of this football club an article in this series by Hugh Jory QC and Matthew Bradley entitled “Where does the law stand now on discounts for minority holdings in non quasi-partnership companies?”
The judge identified the sum of £2.5m, which he found to be a disguised dividend to Mr Owen Oyston rather than loans because they were repayments to companies under his control and in which he was beneficially interested, with no particular obligation to repay. As Mr Owen Oyston himself noted, whether repayment occurred or not was a matter within his discretion. That was prejudicial because “paying away significant monies to no benefit to Blackpool FC detrimentally affects the company’s value. The £2.5 million could have been used to provide a return to Blackpool FC or it could have been spent on football-related matters, like a new training pitch or new players”. The judge held that it was unfairly prejudicial because it was “clear discrimination between the interests of [the Oyston’s company, Segesta] and those of the other members of the club. That discrimination – which benefited Segesta and disadvantaged the other members – was plainly unfair”.
The judge found there to have been other disguised dividends too, in the sums of £4.2m and just under £1m in respect of debts owed by Segesta not Blackpool FC, and in the sum of just over £8m in the form of ‘uncommercial’ loans to Travelodge for the benefit of the Oyston Side, as well as a payment of an “essentially gratuitous” £11m as to which the judge noted “the nature of the payment was translated from director’s remuneration to Mr Owen Oyston for past services to indemnification of [Z] in relation to past costs incurred by it on behalf of Blackpool FC”.
The Blackpool FC case raised another important theme, which recurs in unfair prejudice petitions, namely the complaint that a company has not paid dividends. The judge reminded himself that “it is trite that the declaration of dividends is a matter within the discretion of the directors of a company and that if the directors, in their discretion, consider that no dividends should be paid, a court should be slow to question that discretion and slow to substitute its decision for that of the directors.”. He noted that the present case was not one where no dividends had been paid given the findings he had made about payments being disguised dividends. He concluded “A failure to pay dividends can only be regarded as unfair prejudice if there is some inconsistency in the way the company behaves as regards different members. Thus if a divided, or something which is in substance a dividend, even if dressed up as something different – is paid to one member and not another that is an indicator of unfair prejudice.” Accordingly, the judge held that there had been unfair prejudice in that case by reason of the disguised dividend payments.
Blackpool FC: what happens if the petitioner does not have clean hands?
The Blackpool FC case also provides confirmation of the distinction between petitioners for just and equitable winding up, where a petitioner must come to court with clean hands, and section 994 petitions where no such doctrine applies to the petitioner. However, as the judge pointed out by reference to re London School of Electronics  BCLC 273, if a s.994 petitioner comes to court without clean hands, this may render conduct on the other side not unfair, even if prejudicial (in which case there is no remedy for the petitioner at all) or if it does not go that far, may still affect the relief that the court thinks fit.
The judge held that there was no such conduct of the petitioner in this case. However, it is a matter of record that the judge was prevented from advancing his bespoke remedial ‘solution’, which would have kept both the petitioner and the respondent at the club (following the same sort of solution advanced in the Neath Rugby case dealt with below). The reason for this was because after the conclusion of the trial the judge was informed that Mr Belokon had given notice of his resignation from the board following discussions with the Football League concerning his ability to continue as a director of a football club playing in the English Football League following recent convictions (not on the merits but based on non-attendance by Mr Belokon) for money laundering and fraud in Kyrgyzstan.
Neath Rugby Ltd: how wide is the Court’s discretion when it comes to giving relief?
In his reasoning as to what relief he should grant having found the necessary unfair prejudice to confer that jurisdiction on him (which evidently he formulated before finding out about Mr Belokon’s resignation from the board), the judge in the Blackpool FC case made extensive reference to another sports case which is an important feature on the landscape of unfair prejudice petitions, which this time concerns the rugby club, Ospreys.
Neath Rugby Ltd (“Neath”) was one of two equal shareholders in Neath-Swansea Ospreys Ltd (“Ospreys”), owner of the Ospreys regional rugby team. Two individuals owned one share each in Neath. The thrust of the petitioning shareholder’s (Mr Hawkes’) complaint was that his co-shareholder in Neath, Mr Cuddy (who was also a director of Ospreys as the nominee of Neath) had not only failed to represent the interests of Neath, but had acted against them. Included amongst the complaints in the petition was that Mr Cuddy had failed to cause more Osprey matches to be played at the Gnoll sports ground; the withdrawal of Osprey players from Neath; and the fact that Ospreys had commenced trademark proceedings against Neath alleging that Mr Hawkes had caused it to sell goods bearing Ospreys’ trademarked logo without its consent. Whereas he was unsuccessful on those grounds, Mr Hawkes also complained that Neath’s confidential information was used in furtherance of Ospreys’ cause by Mr Cuddy, and the court upheld that complaint as conduct that was unfairly prejudicial conduct of Neath’s affairs as was the breach of the agreement between them that Mr Cuddy would consult Mr Hawkes.
The Court of Appeal in Neath subsequently provided helpful guidance to directors who are nominated to the boards of companies by particular shareholders, in relation to the balancing of the interests between their duties to the nominator and to the company to whose directorship they have been nominated:
“the fact that a director of a company has been nominated to that office by a shareholder does not, of itself, impose any duty on the director owed to his nominator. The director may owe duties to his nominator if he is an employee or officer of the nominator, but such duties do not arise out of his nomination, but out of a separate agreement or office. Such duties cannot however, detract from his duty to the company of which he is a director when he is acting as such…”.
Proceeding on that basis, namely that the director owed a duty to act in the best interests of Ospreys and having found on the facts of the case that there was nothing to suggest that there was any agreement that he had authority to act otherwise than as a director of that company (he did not for example have authority to act as agent for Neath for the purposes of negotiations with the other owner of the shares in Osprey), Stanley Burnton LJ said: “I do not see how it is possible to establish that in making a decision for Osprey[s] Mr Cuddy was acting in a manner that was unfairly prejudicial to Mr Hawkes if Mr Cuddy’s only legal duty was to act in the best interests of Osprey. On the other hand, I understand it to be accepted by Mr Cuddy that a failure to consult Mr Hawkes in relation to a matter to be decided by Osprey[s] affecting Neath would constitute conduct in relation to the affairs of Neath that could be unfairly prejudicial to Mr Hawkes”.
The Court of Appeal also considered what constituted ‘the affairs of the company’ and like the judge at first instance, rejected the argument that the affairs of Neath and of Ospreys were so intermingled that all of the affairs of the latter were affairs of the former. It also approved the propositions that:
- ‘the affairs of the company’ are extremely wide and should be construed liberally;
- in determining the affairs of a parent company, the court looks at the business realities of a situation and does not confine them to a narrow legalistic view;
- ‘affairs’ encompasses all matters which may come before the company’s board for consideration (which may include matters which do not actually come before the board); and
- the conduct of ‘affairs’ of a parent company includes refraining from procuring a subsidiary to do something or condoning by inaction an act of a subsidiary, particularly when the directors of the parent and the subsidiary are the same.
On the facts of that case, the Court of Appeal supported the judge’s conclusion that Ospreys’ participation along with three other regional sides, in discussions with the Welsh Rugby Union could not be described as conduct of the affairs of Neath. What was unfairly prejudicial because of the agreement between them was the failure of Mr Cuddy to consult with Mr Hawkes.
When it came to devising a remedy for the unfair prejudice that he found to be made out, this case illustrates the width of the court’s discretion under s.996 Companies Act 2006 to make whatever order it sees fit. In fact the case is authority for the proposition that the width of that discretion includes making an order that the petitioner does not seek or want, particularly where the prayer to the petition incudes “the all-but-universal” wording “that such other order may be made as the court thinks fit”. At trial, Lewison J had found a solution in an offer made jointly to Mr Hawkes by Mr Cuddy and the other shareholder in Ospreys, which amongst other things left both Mr Hawkes and Mr Cuddy having continuing involvement, the former having effective control of Neath and the latter having a position on the board of Ospreys. Stanley Burnton LJ commented on the judge’s remedy that:
“This was a not untypical case of businessmen falling out. As found by the judge, Mr Cuddy’s conduct did not justify his exclusion from Osprey, and he could not continue as a director of Osprey if he or his wife did not retain a share in Neath. A perfect solution to the problems caused by the hostility between Mr Hawkes and Mr Cuddy could not be devised. In this area, the perfect may well be the enemy of the good. The judge’s order represents a, and probably the, least bad solution.”
Arbitration or Court room?
As the judge pointed out in the Nuneaton Borough FC case referred to above, divisions in the board room are particularly unwelcome in the context of sports clubs, and well publicised ones including with up-to-the-minute tweets from the courtroom of what has just been said over the course of the proceedings makes it even more so. One potential solution to ensuring that dirty laundry is kept in private is to opt for arbitration clauses in shareholder agreements, to ensure that the allegations, proceedings and evidence are conducted in private.
Here too, the jurisprudence on whether arbitration clauses can prevent proceedings in court for unfair prejudice arises from cases involving sports clubs. In Exeter City AFC Ltd v Football Conference Ltd  EWHC 831 (Ch), it was held that the shareholder’s right to petition the court for unfair prejudice could not be diminished or removed for example by an arbitration clause requiring a petition to be stayed. That is no longer good law. In Fulham Football Club (1987) Ltd v Richards  Ch 333 that case was overruled and the Court of Appeal confirmed that there was no reason of public policy why arbitration clauses should not bind claims for unfair prejudice.
At almost all levels, sport is powerful drama. It engenders passionate reactions, both on and off the pitch. Sport can also be frustrating, not just for the fans, but for those behind the scenes in the board room and/or minority shareholders. Success in sport generates investment by both corporate investors, high net worth individuals and fans alike and there is a lot of money to be made in certain sports, particularly in football. All of this makes sport a ripe arena for shareholder disputes and it is likely that we will see an increase in sporting battles being refereed and determined in court and arbitration proceedings.
It is no coincidence, therefore, that some of the main jurisprudence on petitions for unfair prejudice stems from or is cemented by cases involving shareholders in the sports sector. Anyone pursuing or defending such petitions will need to pay careful regard to such jurisprudence, not least the fact that when it comes to evaluating the likely remedy to be ordered by the Court. The Court has a wide discretion and has shown itself not minded simply to rubber-stamp the typically proposed order (that the successful petitioner’s shares be purchased by the respondent) without first considering whether a bespoke ‘solution’ is more appropriate.
The context of the dispute when it comes to the Court’s consideration of fairness is also paramount. As Lord Hoffmann noted in O’Neill v Phillips:
“Although fairness is a notion which can be applied to all kinds of activities its content will depend upon the context in which it is being used. Conduct which is perfectly fair between competing businessmen may not be fair between members of a family. In some sports it may require, at best, observance of the rules, in others (‘it’s not cricket’) it may be unfair in some circumstances to take advantage of them. All is said to be fair in love and war. So the context and background are very important.”
Finally, litigation is expensive and petitions for unfair prejudice can be a real drain on resources – financial, staff and emotional – for all involved. Furthermore, such disputes in the sports sector can lead to parties taking their eyes off the ball in so far as the continued success and reputation of the company are concerned (both on and off the pitch). In those circumstances, many shareholder disputes cry out for alternative dispute resolution such as mediation, which if successful, will save the parties from the stresses, strains and costs of litigation. However, a successful mediation obviously requires engagement from all relevant parties and recent reports suggest that this was not the case in the recently publicised dispute between Swansea City FC’s Supporters Trust with those who sold their shares during the Swans’ American takeover in 2016.
Parties in the sports sector might also find that compromising disputes and avoiding litigation will have a positive impact both on the sports field and in the company’s ability to react when it needs to do so, e.g. raising finance immediately prior to the transfer window.
Hugh Jory QC and Richard Liddell
4 New Square
© Hugh Jory QC and Richard Liddell. This article is for general information only and is not legal advice. No liability is accepted for any loss or damage which may result from reliance on it. Always consult a qualified lawyer about a specific legal problem. Please do not reproduce it without permission.
About the Authors
Hugh Jory QC specialises in commercial and commercial chancery litigation and company and insolvency law. He is ranked in the legal directories as a leading silk and has acted in shareholder disputes for over 20 years. Prior to that he worked as an investment analyst with an investment bank in the City focussing on the valuation of shares. He has been involved in shareholder disputes ranging from companies which are listed to those which are private including those which are family run, and he has acted for and against shareholders ranging from private equity funds to private individuals.
Richard Liddell is a barrister at 4 New Square and his practice primarily covers four areas: commercial disputes (including shareholder disputes and international arbitration), sports law, professional liability claims and construction and engineering litigation. The legal directories describe him as “a superb advocate”, “very good on dispute strategy and tactics”, “very well liked and has a very amicable manner” and “good at cutting through the noise to get at the points that matter”.
 “A member of a company may apply to the Court by petition for an order…… on the ground (a) that the company’s affairs are being or have been conducted in a manner that is unfairly prejudicial to the interests of members generally or of some part of its members (including at least himself), or (b) that an actual or proposed act or omission of the company (including an act or omission on its behalf) is or would be so prejudicial.”
 Re a Company No. 00789 of 1987 (Nuneaton Borough A.F.C. Ltd (1989) 5 BCC 792 Ch D (Companies Court)
 Page 800, E per Harman J.
 (1)If the court is satisfied that a petition under this Part is well founded, it may make such order as it thinks fit for giving relief in respect of the matters complained of.
(2)Without prejudice to the generality of subsection (1), the court’s order may—
(a)regulate the conduct of the company’s affairs in the future;
(b)require the company—
(i)to refrain from doing or continuing an act complained of, or
(ii)to do an act that the petitioner has complained it has omitted to do;
(c)authorise civil proceedings to be brought in the name and on behalf of the company by such person or persons and on such terms as the court may direct;
(d)require the company not to make any, or any specified, alterations in its articles without the leave of the court;
(e)provide for the purchase of the shares of any members of the company by other members or by the company itself and, in the case of a purchase by the company itself, the reduction of the company’s capital accordingly.
 Page 802, E-F.
 Re Nuneaton Borough Association Football Club Ltd (No.2)  BCC 44
 Re Leeds United Holdings Plc  BCC 131
 Page 143, per Rattee J.
 See also Re Coroin Ltd  EWHC 2343 (Ch) per David Richards J
 VB Football Assets v Blackpool Football Club (Properties) Ltd  EWHC 2767 (Ch)
 A company known as AS BFFH was the sole shareholder of VB Football Assets. The former was 50% owned by Mr Belokon.
 Hawkes v Cuddy, in the matter of Neath Rugby Ltd  EWHC 2999 (Ch),  EWHC 210 (Ch) and in the Court of Appeal  EWCA Civ 291
 Paragraph 32, Stanley Burton LJ.
  EWCA Civ 855
  UKHL 24