Exit rights of minority shareholders in a private limited company (IVOR nr. 72) 2010/3.3.9.4:3.3.9.4 Freeze-out

Exit rights of minority shareholders in a private limited company (IVOR nr. 72) 2010/3.3.9.4

3.3.9.4 Freeze-out

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.

In certain circumstances, it can be unfürly prejudicial to refuse to pay an adequate amount of dividend to the shareholders. For instance, preference shareholders may have a legitimate expectation that dividends are paid when the company has sufficient distributable profits.1 These legitimate expectations may be protected in the way like the legitimate expectation of a member in a quasi-partnership to be seated on the board of the company is protected.2 However, when observing the case law, it appears that courts have only intervened in cases in which members obviously have been frozen out.

In Re Sam Wener & Sons Ltd, a very low dividend was paid to the shareholders over a period of no less than thirty-seven years. The company withheld large amounts of cash and undistributed revenue profits. Some of the shareholders of the company were also directors of the company and received remuneration in their capacity as such. Two shareholders, who were not directors, petitioned on the unfür prejudice remedy. The judge, Peter Gibson J, held that the interests of the shareholders who were not involved in the management differed from those who were also directors. For the return on their investment, the shareholders who were not directors depended solely on the distribution of dividends. According to Peter Gibson J, the repeated denial of the company to pay langer dividends was unfürly prejudicial.3

In Grace v Biagioli, each of the foor shareholders was entitled to £20,000 in dividend relating to the financial year 2002, further to their agreement for distribution of these profits made in the annual general meeting.4Trust and confidence had broken down between a shareholder named Grace and the other three shareholders. In order to prevent that Grace receive his dividend, the other shareholders subtracted the £80,000 from the company onder the guise of costs of sales and expenses. No dividends were paid. The Court of Appeal held that the conscious and deliberate refusal to pay the dividend to Grace amounted to unfürly prejudicial conduct and ordered his buy-out.

Deze functie is alleen te gebruiken als je bent ingelogd.