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Questions and Answers
Which proceeding should Alex pursue in response to unfair prejudice against his interests?
Which proceeding should Alex pursue in response to unfair prejudice against his interests?
In what circumstance can a court refuse to grant a winding up order under the Insolvency Act 1986?
In what circumstance can a court refuse to grant a winding up order under the Insolvency Act 1986?
What is a key factor in determining whether a court finds it just and equitable to wind up a company?
What is a key factor in determining whether a court finds it just and equitable to wind up a company?
If a shareholder is unhappy with the conduct of directors misusing company funds, which claim would they pursue?
If a shareholder is unhappy with the conduct of directors misusing company funds, which claim would they pursue?
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Which case illustrates the last option for shareholders to protect their interests through winding up?
Which case illustrates the last option for shareholders to protect their interests through winding up?
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Which of the following parties is NOT able to petition for unfair prejudice?
Which of the following parties is NOT able to petition for unfair prejudice?
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What aspect does the objective test of unfair prejudice focus on?
What aspect does the objective test of unfair prejudice focus on?
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Which of the following is NOT considered unfair conduct under the unfair prejudice remedy?
Which of the following is NOT considered unfair conduct under the unfair prejudice remedy?
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In evaluating unfair prejudice, what is NOT required regarding identifiable loss?
In evaluating unfair prejudice, what is NOT required regarding identifiable loss?
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What is the relationship between unfairness and prejudice in the context of unfair prejudice claims?
What is the relationship between unfairness and prejudice in the context of unfair prejudice claims?
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When considering members' interests in unfair prejudice cases, which factor is NOT included?
When considering members' interests in unfair prejudice cases, which factor is NOT included?
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Which statement about the requirement of bad faith in unfair prejudice claims is correct?
Which statement about the requirement of bad faith in unfair prejudice claims is correct?
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Which of the following best describes a characteristic of a quasi partnership?
Which of the following best describes a characteristic of a quasi partnership?
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What is a key factor that might establish a legitimate expectation for shareholders in a quasi partnership?
What is a key factor that might establish a legitimate expectation for shareholders in a quasi partnership?
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Under the Companies Act 2006, what can a court order if unfair prejudice is found against a shareholder?
Under the Companies Act 2006, what can a court order if unfair prejudice is found against a shareholder?
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Which of the following statements about derivative proceedings is true?
Which of the following statements about derivative proceedings is true?
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What does the no reflective loss principle aim to prevent?
What does the no reflective loss principle aim to prevent?
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In the context of unfair prejudice, which of the following is NOT required to establish a claim?
In the context of unfair prejudice, which of the following is NOT required to establish a claim?
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What role does mutual trust and confidence play in determining legitimate expectations?
What role does mutual trust and confidence play in determining legitimate expectations?
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In Ebrahimi v Westbourne Galleries Ltd, what aspect was primarily focused on regarding shareholders?
In Ebrahimi v Westbourne Galleries Ltd, what aspect was primarily focused on regarding shareholders?
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Which scenario best illustrates the concept of unfair prejudice?
Which scenario best illustrates the concept of unfair prejudice?
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What is one main difference between unfair prejudice claims and derivative proceedings?
What is one main difference between unfair prejudice claims and derivative proceedings?
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Members of a company are not permitted to petition for unfair prejudice under S994.
Members of a company are not permitted to petition for unfair prejudice under S994.
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An objective test for unfair prejudice must consider the subjective feelings of the petitioners.
An objective test for unfair prejudice must consider the subjective feelings of the petitioners.
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The legal right of members as per the articles is irrelevant when determining unfair prejudice.
The legal right of members as per the articles is irrelevant when determining unfair prejudice.
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It is necessary to show bad faith in order to establish a claim for unfair prejudice.
It is necessary to show bad faith in order to establish a claim for unfair prejudice.
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Unfairness in the context of unfair prejudice refers only to unlawful conduct.
Unfairness in the context of unfair prejudice refers only to unlawful conduct.
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Identifiable loss must be proven in quantifiable monetary terms to establish a claim for prejudice.
Identifiable loss must be proven in quantifiable monetary terms to establish a claim for prejudice.
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Creditor petitions for unfair prejudice can be made only under a winding-up order.
Creditor petitions for unfair prejudice can be made only under a winding-up order.
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A company can be wound-up by the court if it is deemed just and equitable, even if there are alternative remedies available to the petitioners.
A company can be wound-up by the court if it is deemed just and equitable, even if there are alternative remedies available to the petitioners.
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The case 'Ebrahimi v Westbourne Galleries Ltd 1972' is considered a last resort for shareholders looking to protect their interests.
The case 'Ebrahimi v Westbourne Galleries Ltd 1972' is considered a last resort for shareholders looking to protect their interests.
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Alex should pursue derivative proceedings against the majority shareholders who have diluted his shareholding.
Alex should pursue derivative proceedings against the majority shareholders who have diluted his shareholding.
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Good faith of the petitioner is not considered a factor when determining if a company should be wound up based on just and equitable grounds.
Good faith of the petitioner is not considered a factor when determining if a company should be wound up based on just and equitable grounds.
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A breakdown in mutual trust and confidence can be a valid reason for the court to consider winding up a company under the quasi partnership doctrine.
A breakdown in mutual trust and confidence can be a valid reason for the court to consider winding up a company under the quasi partnership doctrine.
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In a quasi partnership, legitimate expectations are considered essential for decisions to be equitable.
In a quasi partnership, legitimate expectations are considered essential for decisions to be equitable.
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Unfair prejudice claims can only arise if there is a financial loss to the shareholder.
Unfair prejudice claims can only arise if there is a financial loss to the shareholder.
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The concept of mutual trust and confidence is irrelevant in determining the nature of shareholder relationships in family-run companies.
The concept of mutual trust and confidence is irrelevant in determining the nature of shareholder relationships in family-run companies.
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Under the no reflective loss principle, shareholders can bring personal claims that reflect losses incurred by the company.
Under the no reflective loss principle, shareholders can bring personal claims that reflect losses incurred by the company.
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A majority shareholder’s actions in a quasi partnership can sometimes lead to legitimate expectations being infringed.
A majority shareholder’s actions in a quasi partnership can sometimes lead to legitimate expectations being infringed.
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The court has no discretion in determining remedies for unfair prejudice under section 996 of the Companies Act 2006.
The court has no discretion in determining remedies for unfair prejudice under section 996 of the Companies Act 2006.
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Derivative proceedings are initiated by members acting on behalf of the company for claims that benefit the shareholders personally.
Derivative proceedings are initiated by members acting on behalf of the company for claims that benefit the shareholders personally.
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In Ebrahimi v Westbourne Galleries Ltd, the case primarily examined the lawful conduct of shareholders.
In Ebrahimi v Westbourne Galleries Ltd, the case primarily examined the lawful conduct of shareholders.
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The outcome of the case O'Neill v Phillips highlighted that the concept of legitimate expectation should be restricted.
The outcome of the case O'Neill v Phillips highlighted that the concept of legitimate expectation should be restricted.
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The shares in a quasi partnership are usually freely transferable and marketable.
The shares in a quasi partnership are usually freely transferable and marketable.
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Study Notes
Unfair Prejudice Remedy
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S994 Petition Criteria: A company's affairs are unfairly prejudicial to members (including the petitioner), or an act/omission is unfairly prejudicial.
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Petitioners: Company members, non-members with transferred shares, the Secretary of State, and creditors (in administration).
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Unfair Prejudice Definition: An objective test; a reasonable bystander would see the conduct as unfairly prejudicial; bad faith or intent to harm aren't needed. The conduct must be both unfair and prejudicial.
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Unfairness: Includes unlawful conduct (breaching articles or contracts) and lawful conduct that breaches legitimate expectations/equitable considerations.
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Prejudice: Doesn't need quantifiable monetary loss or economic benefits.
Members' Interests & Scope
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Members' Formal Rights: Defined by the company articles.
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Legitimate Expectations: Especially relevant in quasi-partnership-like small companies (family companies); expectations about shareholder involvement in management.
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Quasi-Partnership Characteristics: Indicates legitimate expectations are relevant: mutual trust & confidence, agreement on member involvement in management, non-marketable shares. Ebrahimi v Westbourne Galleries (1972) supports these criteria.
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Legitimate expectations example (O'Neill v Phillips): The case highlights that legitimate expectations should not be liberally applied.
Example Applications & Claims
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GreenTech Innovations: Potential unfair prejudice due to Alice and Bob excluding Charlie from decision-making. (Breach of mutual trust and confidence, and expectations to be involved)
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EcoTech Ltd: Potential prejudice from David and Emma's decisions without Frank, even with financial success. Frank's interests are prejudiced even though there is no financial detriment. (voting rights prejudiced and unmet expectations.)
Remedies
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Court Discretion: The court has broad discretion to remedy the unfair prejudice.
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Common Remedy: Reasonable offer to buy out the petitioner. (Re bird Precision Bellows Ltd case).
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Other Remedies: Sale of majority shares, injunctions, alterations to company articles regulation, civil proceedings and authorizing new proceedings in company name.
Derivative Proceedings vs. Unfair Prejudice
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Unfair Prejudice: Members act on their behalf.
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Derivative Proceedings: Members act on behalf of the company.
Reflective Loss Principle
- No Reflective Loss: Avoids double recovery against defendants. Company and shareholder cannot both claim against a third party for the same incident. (Prudential Assurance Co v Newman Industries).
Just and Equitable Winding Up (Last Resort)
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S122 Insolvency Act 1986: Company winding-up if just and equitable (e.g., mutual trust breakdown).
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Factors: Breakdown of trust, petitioner's good faith, company conduct, loss of 'substratum.' (Ebrahim v Westborne).
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S125 Insolvency Act 1986: Court may refuse winding-up if another remedy is available and more appropriate.
Case Examples
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Ebrahimi v Westbourne Galleries Ltd (1972): Key case outlining quasi-partnership characteristics, and the just and equitable winding up (last resort).
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Re Coroin Ltd (2013): Example involving unfair prejudice remedy.
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Re bird Precision Bellows limited: example of courts discretion when determining the remedy
Example Applications, Continued
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Alex (CleanEnergy Ltd.): Likely unfair prejudice claim (exclusion from management, dilution of shares)
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Maria (TechInnovations Ltd.): Likely derivative proceedings (director misconduct).
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Description
This quiz covers the key concepts related to the Unfair Prejudice Remedy, including the criteria for petitions and the definition of unfairness and prejudice. Learn about the rights of members, the scope of the remedy, and the significance of legitimate expectations in company law.
