Company

Quasi-partnership - exclusion of director and shareholder without purchasing shares - unfair prejudice unless necessary to prevent breach of articles of associationIn re Eurofinance Group Ltd: ChD (Pumfrey J): 16 June 2000

The petitioner held shares which gave him effective voting control over EFG, which was the parent company of BRC.

In May 1998 the petitioner was summarily dismissed as a director of the companies and excluded from their management and control; on the same day, the other directors of and shareholders in EFG caused it to sell BRC to a new holding company, in which they were shareholders with a majority of the votes, thereby rendering the petitioner's control over EFG irrelevant to the future conduct of BRC's business.The petitioner applied to the court under s.459 of the Companies Act 1985 for an order that the other directors and shareholders purchase his shares in EFG at a price to be fixed by the court.Philip Heslop QC and Hermann Boeddinghaus (instructed by Orchard) for the petitioner.

Andrew Popplewell QC (instructed by Fox Williams) for the other directors and shareholders and BRC.Held, granting the petition, that, where members of a company entered into an association on the basis that each of those who had ventured his capital would participate in the company's management, each member had a legitimate expectation that the parties in control of the company would not exercise their powers so as to exclude him from participating in its management; that this legitimate expectation was a consequence of equitable restraint rather than its cause, and could not give rise to equitable restraints in circumstances to which the traditional equitable principles had no application; that no binding agreement for the reallocation of shares and the removal/sterilisation of the petitioner's voting rights had ever been satisfactorily concluded; that, where a director of such a company was summarily dismissed without due cause and no offer was made to purchase his shares, it was likely that his exclusion would be unfairly prejudicial to his interests; and that, while it might be reasonable to exclude someone in the position of the petitioner to prevent him acting contrary to the company's articles of association, sufficient grounds had not been advanced to justify the petitioner's summary exclusion from the company, which seemed intended primarily to prevent the petitioner launching a counter-coup.