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Case law: Excluded shareholder/director of small company can claim both unfair prejudice and wrongful dismissal in the same case

Shareholder/directors in small, quasi-partnership companies should consider, before excluding a shareholder from management decisions, whether the shareholder could bring both an unfair prejudice claim and a wrongful dismissal claim in the same legal proceedings.

Legal Alert

This update was published in Legal Alert - January 2017

Legal Alert is a monthly checklist from Atom Content Marketing highlighting new and pending laws, regulations, codes of practice and rulings that could have an impact on your business.

A shareholder of a company can go to court if they believe the company’s affairs are being conducted in a way which is ‘unfairly prejudicial’ to them in their capacity as a shareholder of the company. If a shareholder successfully claims unfair prejudice, the court has wide discretion as to remedies.

One of the common circumstances when a shareholder claims unfair prejudice is when:

  • the shareholder is also a director of a company
  • although incorporated as a limited company, the company operates more as a ‘quasi-partnership’ (usually small companies in which shareholders are also directors and have a legitimate expectation that they will be included in management decisions), and
  • the shareholder has been excluded from management matters.

In a recent case, a shareholder/director of a quasi-partnership company claimed unfair prejudice. However, his claim also alleged wrongful dismissal. The other side applied to strike out the wrongful dismissal claim, saying it should be brought separately.

The High Court said there was no objection to both claims being heard together because both were based on the same facts.

By this reasoning, if a company operates as a quasi-partnership company and a shareholder/director has been sacked from their management role, it will very often be the case that the shareholder can bring both an unfair prejudice and wrongful dismissal claim in the same legal action.

Operative date

  • Now

Recommendation

  • Shareholder/directors in small, quasi-partnership companies should consider, before excluding another shareholder from management decisions, whether the shareholder could bring both an unfair prejudice claim and a wrongful dismissal claim in the same legal proceedings

Case ref: Wootliff v Rushton-Turner [2016] EWHC 2802

Disclaimer: This article from Atom Content Marketing is for general guidance only, for businesses in the United Kingdom governed by the laws of England. Atom Content Marketing, expert contributors and ICAEW (as distributor) disclaim all liability for any errors or omissions.