What is an unfair prejudice petition?
An unfair prejudice petition under section 994 of the Companies Act 2006 is a legal action commenced by a shareholder of a company who alleges that the affairs of the company are being or have been conducted in a manner that is unfairly prejudicial to their interests as a shareholder. Examples include exclusion from decision-making, failure to pay dividends and unfair dilution of ownership. If a petition is successful, the court has a wide discretion as to possible remedies, although most commonly what is sought is an order that the petitioner’s shares in the company are purchased for fair value (a purchase order).
Limitation period
A limitation period is the period of time within which a legal action must be commenced. The relevant time periods to bring certain claims are set out in the Limitation Act 1980. Once the relevant limitation period expires, a claim will become time-barred.
Until very recently, there was considerable doubt as to whether unfair prejudice petitions could be time-barred under the provisions of the Limitation Act 1980. However, the position has been clarified in THG Plc v Zedra Trust Company (Jersey) Limited [2024] EWCA Civ 158. In this important and significant decision, the Court of Appeal found the following:
- The Limitation Act 1980 does, in fact, apply to unfair prejudice petitions.
- Where the relief claimed is payment of a sum of money, petitioners must commence legal proceedings within 6 years from the date upon which the cause of action accrued:
- For petitions seeking alternative forms of relief, such as a purchase order, petitioners must commence legal proceedings within 12 years from date upon which the cause of action accrued; and
- When deciding when the relevant cause of action begins for limitation purposes, if a claim for unfair prejudice arises from a series of incidents, limitation period starts when the petitioner becomes aware (or should reasonably become aware) of the event that provides grounds for petition. This event could be the last incident in the series but that will not always be the case.
Prior to this decision the courts regularly exercised their discretion to limit reliance on historic matters and there was a risk that if a petitioner delayed in issuing an unfair petition, the court would not allow the petition to proceed. By determining that the Limitation Act 1980 applies to unfair prejudice claims, the Court overturned the longstanding assumption that no limitation period applied to unfair prejudice petitions.
What does this mean for petitioners?
The decision in Zedra is significant in that moving forwards, petitioners will need to give careful consideration to the remedy sought as that will dictate the precise limitation period that applies. It might be that a delay in issuing a petition will mean that some forms of relief will be timed –barred, whereas others are not.
In any event, Petitioners should act quickly and without delay in issuing a petition as even where the limitation period has not expired, delay may be relied upon to seek to defeat the petition as historic, ‘stale’ claims are discouraged.
TWM’s expert Dispute Resolution solicitors
TWM has a specialist Dispute Resolution team who are highly experienced in providing bespoke advice and support to aggrieved shareholders, ensuring timely action and effective resolution of disputes.
For expert guidance and assistance in navigating unfair prejudice petitions and limitation periods, please contact our Dispute Resolution team today for an initial no-obligation consultation.