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

Key Point

  • Where a petitioner had commenced proceedings alleging unfair prejudicial conduct by the respondent company shareholders but had since ceased to be a member and shareholder of the company, he retained standing to continue with the petition. The s.994 Companies Act 2006 was directed to persons who had standing to commence proceedings for unfair prejudice. There was no requirement that such a person must continue to hold shares in the company up until the hearing of the petition.

Facts

  • The company provided services for film and television production. The petitioner was removed as a director due to his alleged misappropriation of company funds and a settlement deed was entered into providing for the repayment of those funds by the petitioner to the company
  • The deed also provided that in the event of default, the company was entitled to enforce the charge and transfer the petitioner’s shares to itself. The petitioner made no repayments so the company issued proceedings and obtained default judgment but took no further action at that time regarding the shares.
  • 11 months later, the petitioner presented an unfair prejudice petition alleging breaches by the company directors of the shareholders’ agreement, including that they had diverted opportunities and income to other businesses they owned to the detriment of the company and its shareholders, including him.
  • It was argued that the petitioner’s unfair prejudice petition should fail because he was no longer a member of the company.

Held (High Court)

  • The Court held that the petitioner’s unfair prejudice petition was allowed to proceed. At the time of the company’s application, the petitioner was no longer a member of the company pursuant to the Companies Act 2006 s.112. 
  • However, Section 994(2) contains a requirement for a petitioner to be a member at the time a petition is presented. There is no continuing obligation to remain a member. 
  • In assessing whether to allow a petition to continue the court will look at whether there is a continuing interest in pursuing the petition. Unless there is a continuing interest a petition will be struck out. 
  • However, given the court’s wide discretion under section 996 when considering remedies for unfairly prejudicial conduct, a respondent will rightly face an uphill struggle to show that a petition should be struck out for lack of continuing interest.