Exit rights of minority shareholders in a private limited company (IVOR nr. 72) 2010/3.2.4.2:3.2.4.2 Justifiable breakdown of confidence

Exit rights of minority shareholders in a private limited company (IVOR nr. 72) 2010/3.2.4.2

3.2.4.2 Justifiable breakdown of confidence

Deze functie is alleen te gebruiken als je bent ingelogd.Deze functie is alleen te gebruiken als je bent ingelogd.Deze functie is alleen te gebruiken als je bent ingelogd.

The classic example of a justifiable breakdown of confidence is the case Loch v John Blackwood.

The case Loch v John Blackwood is about a prosperous plc, which was in fact a domestic and family concern. The company had a majority shareholder, who was also a director of the company. Two minority shareholders, who were not involved in the management, petitioned for the winding-up of the company. They alleged and proved that general meetings were not held, balance sheets, profit and loss accounts and reports had not been submitted and dividends were not paid. It was suspected that by means of these omissions, the majority shareholder intended to acquire the shares of the minority shareholders at undervalue. Lord Shaw considered that as a ground for winding-up a justifiable lack of confidence in the conduct of the management of the company's affürs is needed. According to Lord Shaw, proof of lack of probity of the management suffices to justify the winding-up. Their Lordships concluded that the facts in this case turned out that the breakdown in confidence justified ordering the winding-up of the company.1

In the view of this judgment, a breakdown of confidence in itself is not enough ground for a just and equitable winding-up. The breakdown has to be of such nature that it justifies a winding-up. Moreover, in Loch v John Blackwood, the court considered that the loss of confidence must be related to conduct in the company's affürs.

In 1924, the unfür prejudice remedy was not yet available. Sealy and Worthington put forward that in the case of Loch v John Blackwood, the petitioners might well have preferred a buy-out in stead of a winding-up if available.2

In Ebrahimi v Westbourne Galleries, a broader view was taken. In this case, the court considered that the remedy is not confined to circumstances only affecting the petitioner in his capacity as a shareholder. According to the House of Lords, when applying the remedy all circumstances can be taken into regard which affect a petitioner in his relationship to the company or in his relationship to the other shareholders.3

Deze functie is alleen te gebruiken als je bent ingelogd.