Section 152 of the Companies Act 1997 is the broadest remedy in the Act, and in practice the most used by minority shareholders.
Section 152(1) — the ground
A shareholder or former shareholder, or any other entitled person, who considers that the affairs of a company have been, or are being, or are likely to be, conducted in a manner that is, or that any act or acts of the company have been, or are, or are likely to be, oppressive, unfairly discriminatory, or unfairly prejudicial to him in that capacity or in any other capacity, may apply to the Court for an order.
| Element | Width |
|---|---|
| Who may apply | A shareholder, a former shareholder, or any other entitled person — and under s 141, including a personal representative and a person to whom shares have passed by operation of law |
| When | Conduct that has been, is being, or is likely to be — past, present and threatened |
| What | The conduct of the affairs of the company, or any act or acts of the company |
| Standard | Oppressive, unfairly discriminatory, or unfairly prejudicial — three separate limbs |
| Capacity | Prejudicial “in that capacity or in any other capacity” — so prejudice as an employee, creditor or director also counts |
“Former shareholder” lets a person who has already been bought out or squeezed out complain about the conduct that caused it. “Likely to be” allows a pre-emptive application, without the section 142(4) bar on completed conduct. And “or in any other capacity” is what makes section 152 the natural remedy in a quasi-partnership, where the real complaint is exclusion from management or from employment rather than from dividends.
Section 152(2) — the eight orders
(a) requiring the company or any other person to acquire the shareholder’s shares; or
(b) requiring the company or any other person to pay compensation to a person; or
(c) regulating the future conduct of the company’s affairs; or
(d) altering or adding to the company’s constitution; or
(e) appointing a receiver of the company; or
(f) directing the rectification of the records of the company; or
(g) putting the company into liquidation; or
(h) setting aside action taken by the company or the board in breach of this Act or the constitution.
Throughout the Act, acts are saved from invalidity — section 18(1), section 44A(5), section 100, section 63A(1) and section 118(3). Section 152(2)(h) gives the Court power to set aside such action where it was taken in breach of the Act or the constitution and the conduct is unfairly prejudicial.
Paragraph (a) is the most commonly sought: an order that the company or any other person — typically the majority shareholder — buy out the applicant. Unlike the section 91 buy-out, it does not depend on a particular resolution having been passed.
Under section 152(3), no order may be made against the company or any other person unless that person is a party to the proceedings. So a majority shareholder who is to be ordered to buy the shares must be joined.
Sections 152(4) and (5) — conduct the Act deems unfairly prejudicial
(a) Section 45 — pre-emptive rights;
(b) Section 47 — consideration for the issue of shares;
(c) Section 51 — dividends;
(d) Section 57 — offer to purchase the company’s own shares;
(e) Section 63 — financial assistance;
(f) Section 98 — alteration of shareholder rights;
(g) Section 110 — major transactions.
The signing by the directors of a certificate required by this Act without reasonable grounds existing for an opinion set out in it is conduct that is unfairly prejudicial for the purposes of this section.
They remove the hardest part of the case. Ordinarily an applicant must persuade the Court that conduct was unfairly prejudicial — an evaluative judgment. Where one of the seven listed sections has been breached, or a certificate was signed without reasonable grounds, unfair prejudice is established as a matter of law. The argument moves straight to what order should be made.
Subsection (5) reaches every certificate the Act requires: the solvency certificate under section 50(2), the fair-value certificate under section 47(2), the fairness certificate under section 139(4), the insurance certificate under section 140(6), the section 89(3A) certificate, and the amalgamation certificates under sections 234 and 235. Signing one without reasonable grounds is therefore both a route to personal liability and automatic unfair prejudice.
Typical section 152 cases
- Exclusion from management in a company run as a quasi-partnership — caught by “in any other capacity”.
- Dilution by an issue that ignores pre-emptive rights or is at an undervalue — s 152(4)(a), (b).
- Withholding dividends indefinitely while paying the controllers through remuneration.
- Diverting business or opportunities to another entity owned by the majority.
- Refusing information — records, accounts, or the annual report.
- Constitutional changes that cut down the minority’s position — see also section 153.
- Failing to call meetings, or holding them so as to exclude a shareholder.
- Selling the business without a special resolution where section 110 applies — s 152(4)(g).
Where an order under section 152 alters or adds to the constitution, that alteration can only be altered again in accordance with the order or with the leave of the Court (s 153(1)); it has the same effect as if made by the shareholders under section 33 (s 153(2)); and within one month the board must submit a certified copy of the order and the altered constitution to the Registrar (s 153(3)), on pain of an offence by every director (s 153(4)).
Sources
- Companies Act 1997 — ss 18, 33, 44A, 45, 47, 50, 51, 57, 63, 63A, 89, 91, 98, 100, 110, 118, 139, 140, 141, 142, 152, 153, 234, 235, 414
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.