The unfair prejudice remedy Section 402 of the Companies Act 1995

Abstract

This thesis is an attempt to study the possible interpretation of the unfair prejudice remedy as found in the new section 402 of the Companies Act 1995. To this end reference is often made to foreign case law and legal literature. Before dealing in detail with the provision, the introductory chapter discusses the position of an aggrieved minority shareholder under the Commercial Partnerships Ordinance. Reference is here made to the power of the court to order the dissolution and consequent winding up of a company if there existed, in the court's opinion, grounds of sufficient gravity to warrant such dissolution. Chapter 2 then focuses on the potential interpretation of the provision. This chapter is intended as a starting point for a better understanding of this remedy. In addition, this chapter includes some tentative suggestions about one of the central problems with the unfair prejudice remedy. This is the problem of determining the rationale for the rule that independent of any provision in the articles, majorities are prevented from acting in an oppressive or unfairly prejudicial way towards any minority of the shareholders. Emphasis is put on the legitimate expectations of the members to the commercial enterprise. This is done in the light of the UK Court's decision in Ebrahimi v. Westbourne Galleries [1973] AC 360 where it was recognised that the legitimate expectations of shareholders may give rise to limitations on the capacity of the majority to make decisions that are oppressive on the minority. Chapter 3 talks about the potential orders the court may give when it is satisfied • that the member's interests have been unfairly prejudiced and it deems it just and equitable to give an order. The final chapter considers the amendments put forward by the UK Law Commission, in its paper Shareholder Remedies no. 246 (1997), to the unfair prejudice provision in the UK. This brief analysis is done in the light of the possible implications to the Maltese commercial law field if some of these amendments were adopted by the Maltese legislator.