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Operating a business can be stressful, and it is not uncommon for shareholder disagreements to arise.
This can often lead to situations where shareholders feel the company is not being operated in a fair way, such that it has an adverse impact on them or the shareholders generally.
In such instances, shareholders of a company have the right to petition the court for relief where the affairs of the company are or have been conducted in a manner that is unfairly prejudicial to the interests of the shareholders.
That right is afforded by s994 of the Companies Act 2006.
Myerson's Dispute Resolution solicitors discuss remedy, what is a fair offer, and the O'Neill v Phillips offer.
When it comes to unfair prejudice petitions under s994, the petitioning shareholder is asking the court to make an order that is intended to cure the unfair prejudice complained of.
Typically, the remedy sought is that the petitioner's shares are purchased by the other shareholders or the company itself.
In cases where a buyout order is (or is likely to be) sought, a respondent shareholder (often the majority shareholder) can make a tactical offer in terms that it will purchase the petitioning shareholder's shares in accordance with the guidance of the House of Lords decision in O'Neill v Phillips [1999].
If the court considers the offer "fair", this may mean that continuing with the petition will then be regarded as an abuse of process, which could provide grounds for an application to strike out the petition.
An offer to purchase the shares will only offer protection to the respondent if the offer is "fair" in accordance with Lord Hoffman's guidance in O'Neill v Phillips as follows:
An O'Neill v Phillips offer can be made at any point during the course of a shareholder dispute and is useful tactically in terms of striking out a petition and also in terms of cost protection.
However, it is very important that both petitioners and respondents seek professional legal advice as to O'Neill v Phillips offers since their content and timing can often play a critical role as to whether a court will deem the offer fair or not.
This, in turn, will often impact whether the petition is struck out and who will be responsible for the legal costs of the dispute, which will often be substantial.
If you need professional legal advice from a dispute resolution solicitors, please contact Myerson Solicitors LLP: