Unfair Prejudice Remedy Overview

A legal action by a company member (or others) claiming company actions unfairly harm their interests or a group of members.

Specific requirements for an unfair prejudice petition: company actions are unfairly prejudicial, or a proposed/actual act is unfairly prejudicial to member interests.

The standard for determining if actions are unfairly prejudicial: a reasonable observer would see the actions as harming member interests.

Unfairness can be either unlawful (breaking rules) or lawful (violating reasonable expectations).

Members, those with transferred shares/transmissions by law, the Secretary of State and creditors (in administration) can petition for unfair prejudice.

Harm to a member's interest; does NOT need financial proof of loss.

Member interests include formal legal rights per the company's rules and legitimate expectations from the understanding of the shareholders.

Unfair Prejudice protects shareholder's own interests (if they are treated unfairly), while Derivative Proceedings protect the company's itself (if directors act improperly).

Consider Unfair Prejudice if you're a shareholder facing unfair treatment that you're unlikely to tolerate, like being excluded from important meetings or having your shares diluted without your consent.

Choose Derivative Proceedings if you want to hold company directors accountable for misconduct, like misusing company funds or acting against the company's best interests, and you want the company to receive compensation.

A drastic solution where a court can liquidate a company if it is deemed fair and equitable to do so, often used as a last resort when other remedies are inadequate.

Courts may refuse to wind up a company if other solutions are available to shareholders, encouraging them to explore alternative remedies first.

A private company structured on mutual trust, involving members in management, where shares are not freely marketable. It's like a family business.

Assumptions about how a company will operate based on the understanding between shareholders, especially in a quasi-partnership.

When actions by the company or other shareholders harm a member's interests, despite those actions potentially being lawful.

A reasonable observer (not just the person feeling prejudiced) would see the actions are harmful to the shareholder's interests.

This principle prevents a shareholder from claiming for losses that are essentially the company's. It avoids double recovery.

The Court can order various remedies, like forcing the company to buy out the prejudiced shareholder or requiring the company to change its behavior.

The court can make any order it wishes to fix the problem. This includes making the company buy out the petitioner's shares or changing the company's behavior.

The court often orders a fair buyout price for the prejudiced shareholder, especially in cases of breach of trust between shareholders.

Yes, even legally permitted actions can be unfair if they violate a shareholder's legitimate expectations, like a promise of involvement in management.

Members of a company, non-members with transferred shares, the Secretary of State, and creditors (under administration) can petition for unfair prejudice.

An objective test to determine if actions are unfairly prejudicial: Would a reasonable observer see those actions as harming the petitioner's interests?

Harm to a member's interest, but it doesn't need financial proof of loss. It can be intangible like losing control.

Member interests include formal legal rights (company rules) and legitimate expectations (assumptions based on shareholder understanding).

A shareholder's claim that the company or other shareholders acted in a way that unfairly harmed their interests, even if the action itself wasn't illegal. It's about fairness, not just legality.

A shareholder sues on behalf of the company to hold directors accountable for misconduct that harms the company itself, like using company funds for personal gain. The goal is to compensate the company, not the individual shareholder.

A drastic solution where a court orders a company to be liquidated (closed) because it's deemed just and equitable. It's a last resort when other solutions have failed and the company's trust is broken beyond repair.

A private company where shareholders are involved in management and share a high level of mutual trust, similar to a family business. They have legitimate expectations about how the company will operate. This trust is essential.

When a company's actions or decisions harm a shareholder's interests, even if those actions are lawful.

A legal action taken by a shareholder who believes their interests have been unfairly harmed by the company.

A company is a quasi-partnership if it has mutual trust and confidence between shareholders, some or all members are involved in management, and shares are not freely marketable. They're like a family business with shared goals.

Legitimate expectations arise from the understanding between shareholders in a company, especially in a quasi-partnership, about how the business will be run. They're not always explicitly stated, but stem from agreements, past practices, or the nature of the relationship.

Unfair prejudice can result from both unlawful actions that break the company's rules, and also lawful actions that violate the legitimate expectations of a shareholder. It's about the effect on a member's interests, not just the legality of the action.

Unfair prejudice is measured against an objective standard: would a reasonable observer consider the actions to be unfairly harming the member's interests? It's not just a matter of personal opinion.

The court can order a variety of remedies in an unfair prejudice case. Common remedies include a buyout of the prejudiced shareholder's shares, requiring the company to change its behavior, or even barring the company from taking certain actions.

A claim for unfair prejudice focuses on the shareholder's own interests, while a derivative proceeding seeks to protect the company itself. In unfair prejudice, the shareholder's own rights have been violated, but in a derivative proceeding, it's the company that has been harmed.