Part IX of the Companies Act 1997 gathers the enforcement remedies. Section 142 is the fastest of them.
Section 142(1) — two kinds of order
(a) restraining a person who is engaging in or proposes to engage in conduct that is or would contravene the constitution of the company or this Act from engaging in that conduct; or
(b) requiring a person who has refused or failed, is refusing or failing, or is proposing to refuse or fail, to do an act or thing that he is required to do by the constitution or this Act, to do that act or thing.
Paragraph (a) stops something happening; paragraph (b) makes something happen. Both are directed at “a person” — not only the company. So an order may be made against a director, an officer, or a shareholder who is contravening the Act or the constitution.
Under section 142(3), where the Court makes an order it may also grant such consequential relief as it thinks fit.
Section 142(2) — standing
(a) the company; or
(b) a director or shareholder of the company; or
(c) an entitled person; or
(d) the Registrar.
This is the widest standing provision in Part IX. Note that section 141 extends the terms “entitled person”, “former shareholder” and “shareholder” throughout the Part to include a personal representative of such a person and a person to whom shares have passed by operation of law — so an executor or a trustee in bankruptcy may apply without first being registered.
| Remedy | Who may apply |
|---|---|
| s 142 injunction | Company, director, shareholder, entitled person, Registrar |
| s 143 derivative action | Shareholder or director, with leave |
| s 147 personal action | Shareholder or former shareholder |
| s 152 prejudiced shareholder | Shareholder, former shareholder, or any other entitled person |
Section 142(4) — the one hard limit
An order may not be made under this section in relation to conduct or a course of conduct that has been completed.
Section 142 is a forward-looking remedy. Once the shares have been issued, the transaction completed or the meeting held, it is unavailable — whatever the merits.
This matters because the Act repeatedly saves completed acts from invalidity: section 18(1), section 44A(5), section 100 and section 63A(1). A shareholder who waits is left with damages-based remedies — section 143, section 147 or section 152 — rather than prevention.
Note that a course of conduct that is continuing is not “completed”. Where a board is repeatedly acting in breach, an injunction remains available for the future conduct.
Sections 142(5) and (6) — interim relief without an undertaking
The Court may, at any time before the final determination of an application, make, as an interim order, any order it is empowered to make under subsection (1).
Where an application is made for the grant of an injunction under this section, the Court shall not require the applicant, as a condition of granting an interim injunction, to give any undertakings as to damages.
In general civil litigation an applicant for an interlocutory injunction must undertake to compensate the respondent if the injunction turns out to have been wrongly granted. That undertaking is often what deters a minority shareholder of modest means from applying at all.
Section 142(6) removes it. A shareholder with a genuine complaint about a proposed contravention can seek interim relief without exposing personal assets to the company’s losses. Read with the wide standing in subsection (2), it makes section 142 the practical first response to a threatened breach.
When section 142 is the right remedy
| Threatened conduct | Contravention |
|---|---|
| A share issue that ignores pre-emptive rights | s 45 |
| A major transaction without a special resolution | s 110 |
| Action affecting class rights without interest group approval | s 98 |
| A distribution where the solvency test is not met | ss 50, 4 |
| A buy-back without the resolutions or the disclosure document | s 57 |
| A meeting called on defective notice, or a bundled appointment resolution | Sch 2 cl 2; s 133 |
| Refusal to register a transfer without satisfying section 65(4) | s 65 |
| Refusal to allow inspection of records | ss 216, 219 — a mandatory order under s 142(1)(b) |
| Failure to call the annual meeting | s 101 — though s 104 may be more direct |
Section 63(8) contains its own restraining order: a shareholder or the company may apply to restrain proposed financial assistance on the ground that it is not in the best interests of the company and of benefit to shareholders not receiving it, or that the terms are not fair and reasonable. That is a merits-based test, wider than the contravention test in section 142.
Sources
- Companies Act 1997 — ss 4, 18, 44A, 45, 50, 57, 63, 63A, 65, 98, 100, 101, 104, 110, 133, 141–143, 147, 152, 216, 219; Schedule 2
Before relying on anything here, read the current text of the Companies Act 1997 and check for later amendments. If a decision matters to you, get advice — start with the Office of the Public Solicitor, or find a firm in the law firms directory.