3.1 Introduction

This chapter deals with the exit rights of shareholders in private limited companies governed by English law. Currently, most of the rules concerning the company law of England and Wales are contained in the Companies Act 2006. The Companies Act 2006 has been implemented into English law in successive parts, of which the last part took effect on the 1 ^st of October 2009. In addition, company law rules are contained in (other) legislation, rules provided by bodies recognized by the legislator, common law and the articles of association of the company concemed.1

Until 1980, the only effective exit right for shareholders was to apply to the court for an order for the winding-up of the company. At present, this winding-up remedy can still be used, but it is seldom applied in practice. An application for winding-up is granted, if the court is of the opinion that it is just and equitable to do so. This remedy is called the fust and equitable winding-up or the winding-up remedy. The just and equitable winding-up is described in § 3.2.

With the enactment of the Companies Act 1980, a new exit right became available, which forms part of the unfür prejudice remedy. The unfür prejudice remedy can be used in the event that a shareholder is unfürly prejudiced in his interests by other shareholders of the company or by the company itself. This remedy is the revised successor of the oppression remedy, which was introduced in 1948. The oppression remedy of 1948 appeared to be not much more than a dead letter. The unfür prejudice remedy is more successful than its predecessor has been. Rapidly after its introduction, the unfür prejudice remedy became a popular remedy for minority shareholders, due to its wide scope and liberal interpretation by the courts. This remedy enables the shareholder to apply to the court for various orders, of which the order to be bought out at a für price is most frequently applied. A description of this remedy is contained in § 3.3.

Throughout the years, several principles have been developed in the case law concerning the winding-up remedy. In recent times, these principles have also been used by courts when applying the unfür prejudice remedy. In order to understand the principles applied in the unfür prejudice remedy, this chapter starts at their historical setting: the just and equitable winding-up.

Subsequently, § 3.4 is concerned with the present appraisal rights in English law. The appraisal right that is described can be used in the event of a reorganization of the company by means of a voluntary liquidation. The debate about the introduction of additional exit rights in English law is dealt with in § 3.5. This chapter ends with a conclusion, found in § 3.6.