Maggie Otto & Ors v Inner Mongolia Happy Lamb Catering Management Company Limited
[2024] EWHC 497 (Ch)
Nigel Freeborn & Ors v Emery House Property Limited & Anor
24 November 2023
[2023] EWHC 3009 (Ch)
High Court
A company director unfairly gave himself extra shares, breaking company rules. The court ruled in favor of the other shareholders, taking away the extra shares and fixing the problem. This shows directors have to follow the rules and shareholders have rights if the rules are broken.
Key Facts
- •Petition under section 994 of the Companies Act 2006 concerning Emery House Property Ltd.
- •Second Respondent, Mr. McEleney, failed to attend the hearing despite substituted service.
- •Emery House Property Ltd. owns a freehold property divided into 13 flats, each with a 125-year lease.
- •Mr. McEleney, as director, issued 12 additional shares to himself without shareholder approval, breaching pre-emption rights.
- •Mr. McEleney refused to register the transfer of a share to the Second and Third Petitioners.
- •The company failed to insure the building.
Legal Principles
Shareholders' right of pre-emption on allotment of new shares (Companies Act 2006, s.561).
Companies Act 2006
Directors' power to allot shares (Companies Act 2006, s.550) and fiduciary duties under ss.171, 172, and 175.
Companies Act 2006
Breach of shareholders' agreement.
Email exchange and Shareholder Agreement
Right to petition under s.994(2) for prejudice caused by directors' actions.
Companies Act 2006
Company's lack of right to levy a charge on share transfer (Model Articles, article 26(2)).
Model Articles
Outcomes
Cancellation of 12 shares wrongly issued to Mr. McEleney.
Restores parity among shareholders without impacting those not involved in the proceedings.
Registration of one share in the names of the Second and Third Petitioners.
Addresses the refusal to register the transfer.
Rectification of the Register under s.125.
To reflect the above decisions.
Petitioners awarded costs against Mr. McEleney.
Standard consequence of successful petition.
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