Compound Photonics Group Ltd, Re [2022] EWCA Civ 1371 (21 October 2022)

Compound Photonics Group Ltd, Re [2022] EWCA Civ 1371 (21 October 2022)

The Court of Appeal held that the good faith clause in the 2013 Shareholders' Agreement did not entrench Dr. Sachs and Mr. Faulkner as directors or prevent the Investors from exercising their statutory right to remove directors under section 168 of the Companies Act 2006. The clause did not override the express terms of the agreement or the statutory regime. The Investors' actions, though robust, did not amount to unfair prejudice or breach of contract. The appeal was allowed and the order requiring the Investors to buy out the Minorities' shares was set aside.

Citation
[2022] EWCA Civ 1371
Parties
Petitioner/respondent: Mark Faulkner; Petitioner/respondent: Jonathan Sachs; Petitioners/respondents: The Minorities (as listed in Schedule 1 to the Petition); Respondent/appellant: Vollin Holdings Limited; Respondent/appellant: Minden Worldwide Limited; Respondent/appellant: Aldon Investments Limited
Jurisdiction
England and Wales
Judgment Date
21 October 2022
Procedural Posture
Appeal (civil) / Court of Appeal Judgment on Appeal From High Court (business and Property Courts, Companies Court)
Outcome
Appeal allowed
Legal Topics
Unfair Prejudice Petition, Shareholders' Agreements, Directors' Duties, Good Faith Obligations, Removal of Directors, Interpretation of Company Constitutions
Company Law Equity and Trusts Unfair Prejudice Petition Shareholders' Agreements Directors' Duties Good Faith Obligations Removal of Directors Interpretation of Company Constitutions

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Parties

Mark Faulkner

Petitioner/respondent

Jonathan Sachs

Petitioner/respondent

The Minorities (as listed in Schedule 1 to the Petition)

Petitioners/respondents

Vollin Holdings Limited

Respondent/appellant

Minden Worldwide Limited

Respondent/appellant

Aldon Investments Limited

Respondent/appellant

Procedural Posture

Appeal (civil) / Court of Appeal Judgment on Appeal From High Court (business and Property Courts, Companies Court)

Legal Issues

  1. 1 Whether the removal of Dr. Sachs and Mr. Faulkner as directors constituted unfair prejudice under section 994 of the Companies Act 2006
  2. 2 Proper interpretation and scope of the 'good faith' clause in the 2013 Shareholders' Agreement
  3. 3 Whether the 2013 Shareholders' Agreement formed part of the company's constitution for the purposes of directors' duties under section 171(a) of the Companies Act 2006

Ratio Decidendi

The Court of Appeal held that the good faith clause in the 2013 Shareholders' Agreement did not entrench Dr. Sachs and Mr. Faulkner as directors or prevent the Investors from exercising their statutory right to remove directors under section 168 of the Companies Act 2006. The clause did not override the express terms of the agreement or the statutory regime. The Investors' actions, though robust, did not amount to unfair prejudice or breach of contract. The appeal was allowed and the order requiring the Investors to buy out the Minorities' shares was set aside.

Court Disposition

Appeal allowed

Orders

  • Order requiring Investors to buy out Minorities' shares set aside
  • No finding of unfair prejudice under section 994 of the Companies Act 2006