Expert Advice on Unfair Prejudice Claims
If you are a shareholder being treated unfairly, you may have grounds to bring an unfair prejudice claim. At South Bank Legal, our experienced unfair prejudice solicitors advise clients on protecting their rights and taking action where company conduct has caused harm.
Unfair prejudice claims arise under Section 994 of the Companies Act 2006, providing a powerful legal remedy where a company’s affairs have been conducted in a manner that is unfairly harmful to the interests of a shareholder. These claims are most commonly brought by minority shareholders, but can arise in a wide range of commercial situations.
Our team provides clear, strategic advice on unfair prejudice petitions, helping clients resolve disputes efficiently and achieve practical outcomes.
What is an Unfair Prejudice Claim?
An unfair prejudice claim arises where the company’s affairs have been conducted in a manner that is unfairly harmful to the interest as a shareholder.
Under section 994 of the Companies Act 2006, a shareholder can bring a claim where:
- The conduct of the company is unfair
- That conduct has caused prejudice to their interests
This is a flexible legal remedy. The court has wide discretion to determine whether the conduct complained of is unfair and what outcome is appropriate.
These claims are often used where there is a breakdown in trust between members of a company, particularly in closely held or family-run businesses.
When Can an Unfair Prejudice Claim Be Brought?
Unfair prejudice claims can arise in many different situations. The key question is whether the company’s affairs have been conducted in a manner that is unfairly damaging to a shareholder.
Common examples include:
Exclusion from Management
One of the most common grounds for a claim is exclusion from management, particularly where there was an expectation that the shareholder would be involved in running the business.
Dilution of Shares
In some cases, shares to dilute a shareholder’s interest may be issued improperly. This can reduce a shareholder’s voting power and financial interest, potentially giving rise to a claim.
Misuse of Company Funds
Where company funds are used for personal benefit, or not in accordance with the company’s interests, this may amount to unfairly prejudicial conduct.
Breaches of Shareholder Agreements
A failure to follow agreed terms in shareholders agreements or the company’s Articles of Association may also lead to disputes. These documents often set out how decisions should be made and how shareholders should be treated.
Conduct by Majority Shareholders
Majority shareholders often have control over decision-making. However, they must not use that control in a way that is unfair to minority shareholders.
Where their actions disadvantage minority shareholders, an unfair prejudice claim may arise.
Minority Shareholders and Protection
Minority shareholders are often in a vulnerable position, particularly where they have limited influence over company decisions.
The law provides protection where the company’s affairs have been conducted in a manner that is unfairly harmful to their interest as a shareholder.
This ensures that:
- Minority shareholders are not excluded unfairly
- Their rights are respected
- They are able to challenge improper conduct
Bringing a claim can help restore fairness and protect your position within the company.
Section 994 of the Companies Act
Unfair prejudice claims are governed by section 994 of the Companies Act 2006.
This allows a shareholder to apply to the court where:
- The company’s affairs have been conducted in a manner that is unfairly prejudicial
- Or an act or omission is likely to be prejudicial
The reference to 994 of the Companies Act is central to these claims and provides the legal basis for bringing proceedings.
The court has wide discretion in determining both whether unfairness has occurred and what remedy should be granted.
Remedies in Unfair Prejudice Claims
One of the key advantages of unfair prejudice petitions is the flexibility of the remedies available.
The court may order:
- The purchase of shares at a fair value
- Changes to the management of the company
- Regulation of the company’s affairs
- Other orders to resolve the dispute
The most common outcome is an order requiring one shareholder to buy out another. This provides a clean break and allows the business to continue.
Bringing a Petition
The process of bringing a petition involves several key steps:
- Assessing whether there has been unfairly prejudicial conduct
- Reviewing relevant documents such as shareholders agreements and the company’s articles
- Gathering evidence of how the company’s affairs have been conducted in a manner that is unfair
- Considering options for dispute resolution before issuing proceedings
- Filing a petition under section 994
It is important to seek early legal advice before taking action. This can help ensure that the claim is properly structured and that the best strategy is adopted.
Alternative Dispute Resolution
Not all unfair prejudice claims need to proceed to court. In many cases, disputes can be resolved through dispute resolution methods such as:
- Negotiation
- Mediation
- Settlement discussions
These approaches can often achieve a quicker and more cost-effective outcome.
At South Bank Legal, we always consider whether dispute resolution is appropriate before pursuing formal litigation.
The Importance of Shareholder Agreements
Well-drafted shareholders agreements can play a key role in preventing disputes.
These agreements often include:
- Decision-making procedures
- Rights and obligations of shareholders
- Mechanisms for resolving disputes
- Exit provisions
However, where agreements are unclear or not followed, disputes may arise. In these situations, legal interpretation and enforcement may be required.
How South Bank Legal Can Help
At South Bank Legal, our specialist unfair prejudice solicitors provide clear, practical advice on all aspects of unfair prejudice claims.
We can assist with:
- Assessing whether unfairly prejudicial conduct has occurred
- Advising on your interest as a shareholder
- Reviewing shareholders agreements and the company’s articles
- Supporting minority shareholders in protecting their rights
- Advising majority shareholders on managing disputes
- Handling unfair prejudice petitions
- Representing clients in negotiations and court proceedings
- Exploring options for dispute resolution
We understand that these disputes can be complex and sensitive. Our focus is on achieving a practical and commercially sensible outcome.
Why Early Legal Advice Matters
Seeking early advice can make a significant difference in unfair prejudice claims.
Early action can:
- Clarify your legal position
- Identify the strength of your claim
- Encourage early settlement
- Reduce costs and disruption
Whether you are a minority or majority shareholder, taking timely advice can help protect your position and avoid escalation.
Speak to Our Unfair Prejudice Solicitors
If you believe that a company’s affairs have been conducted in a manner that is unfairly harmful to your interests, you may have grounds for an unfair prejudice claim.
Our experienced unfair prejudice solicitors are here to guide you through every stage, from initial advice to bringing a petition where necessary.
Contact South Bank Legal today to discuss your situation and find out how we can help you resolve your dispute.