Konstantin Kamenetskiy & Ors v Vitali Zolotarev & Ors (Re Variti Management Services Limited)
[2023] EWHC 2619 (Ch)
Hikari Miso (UK) Limited v David Knibbs & Ors
5 June 2023
[2023] EWHC 1340 (Ch)
High Court
Two groups of shareholders disagreed about a business contract. The judge decided who had the power to make certain decisions, saying that one group could block decisions even if it hurt the company, as the contract allowed them to. The judge also said neither group broke any rules.
Key Facts
- •Shareholder agreement dispute between Hikari Miso (UK) Ltd (HMUK) and other shareholders of R&R Tofu Ltd.
- •HMUK holds 32.8% of R&R Tofu Ltd.'s shares, while the defendants hold the remaining shares.
- •The dispute centers on the interpretation of the Subscription and Shareholders' Agreement (SSA) and whether breaches occurred.
- •The SSA defines 'Reserved Matters' requiring 70% or 75% shareholder consent.
- •HMUK alleges breaches by defendants, and defendants allege breaches by HMUK.
- •The only remedies sought are declarations regarding the SSA's construction and breaches.
Legal Principles
Contractual interpretation is objective, considering the contract as a whole and the factual matrix.
Sara & Hossein Asset Holdings Ltd v Blacks Outdoor Retail Ltd [2023] UKSC 2, Wood v Capita Insurance Services Ltd [2017] UKSC 24, Arnold v Britton [2015] UKSC 36
Shareholders generally have the right to vote in their own self-interest.
North-West Transportation Co. Ltd v Beatty (1887), Burland v Earle [1902], Re Compound Photonics Group Ltd [2022] EWCA Civ 1371
A shareholder agreement can modify or limit the scope of directors' fiduciary duties.
Wilkinson v West Coast Capital [2007] BCC 717, Companies Act 2006 s. 170(4)
Specific contractual provisions usually override general provisions.
Wilkinson v West Coast Capital [2007] BCC 717, Towergate Financial (Group) Ltd v Hopkinson [2020] EWHC 984 (Comm)
Outcomes
Shareholders holding over 30% have the right to veto Reserved Matters.
Plain meaning of the SSA.
Shareholder consent can be manifested through various methods, including a nominee director's approval at a board meeting.
Interpretation of Clauses 6.1(a) and 6.2 of the SSA.
Shareholders can exercise veto power self-interestedly, even if contrary to their nominee director's view.
Interpretation of the SSA and reliance on Wilkinson v West Coast Capital.
Nominee directors must act in good faith in the interests of the company, but within the scope of their powers as limited by the SSA.
Interpretation of Clauses 6.1(a) and 6.4 of the SSA and application of Wilkinson v West Coast Capital.
HMUK's actions regarding the 'Five Matters' were not in breach of the SSA.
HMUK had the right to veto, and H acted appropriately as a director within the limitations of the SSA.
HMUK's decisions on dividends and external funding were not material breaches of the SSA.
Dividends were not Reserved Matters; HMUK exercised reasonable judgment on financial prudence; and external funding decisions were within the Board's scope, subject to directors' duties.
Disputes over the definition of Reserved Matters (lawyers, capital expenditure, employment contracts, hire purchase) were resolved based on the specific language of the SSA.
Interpretation of Schedule 3 and Clause 6.2(d) of the SSA.
There was no evidence of a 'Strategy of Disruption' by HMUK or H.
HMUK legally exercised veto powers; H acted within his directorial duties; and evidence did not support claims of deliberate harm to the Company.
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