Business Relationship Fallen Apart? The Law Can Help Pick Up the Pieces
30 Nov 2021
No matter how long and successful a business relationship may be, there is always a risk that it may end acrimoniously. Such disputes can be intractable and, as a High Court ruling showed, there are times when only the law can provide closure.
The case concerned a thriving company that was established in the 1980s by two men in their 20s who were best friends at school. After more than three decades working together, they fell out irretrievably. One of them (A) decided that the other (B) must resign from the company’s board and brought pressure to bear upon him to do so.
Following a meeting, B signed documents by which he resigned as a director. He agreed in principle to sell his and his wife’s shares in the company to A for £6.6 million. However, B subsequently declined to sign the sale contract, instead launching proceedings against A, the company and its other directors.
B asserted that A had tried to manipulate him with a view to removing him from the company. He and his wife claimed that, contrary to Section 994 of the Companies Act 2006, the company’s affairs had been conducted in a manner that unfairly prejudiced their interests as minority shareholders.
Upholding that claim, the Court found that B’s formal resignation prior to negotiating a price for his shares was influenced by a threat and an implied threat made by A. Although he was not directly influenced to agree a £6.6 million price for his shares by any threat, he had been forced to negotiate that price from a position of weakness, having already resigned from the board.
In the light of those findings, the Court ordered the company or its directors to buy out the combined 45 per cent shareholding of B and his wife for a total of £20,853,000. B’s claim that he was pressured into selling his shares in a connected company at an undervalue was rejected.