Mark Faulkner & Ors v Vollin Holdings Limited & Ors

Mark Faulkner & Ors v Vollin Holdings Limited & Ors

The Court of Appeal held that the obligation of good faith in the shareholders' agreement did not entrench Dr. Sachs and Mr. Faulkner as directors or prevent the majority shareholders from exercising their statutory rights to remove them. The shareholders' agreement did not form part of the company's constitution for the purposes of directors' duties under section 171(a). The actions of the Investors and their nominee directors were not unfairly prejudicial within the meaning of section 994 of the Companies Act 2006, as there was no breach of contract or directors' duties, and no financial prejudice to the Minorities.

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
Civil Appeal (companies/shareholder Dispute) / Court of Appeal Judgment on Appeal
Outcome
Appeal allowed; Respondents' Notice dismissed.
Legal Topics
Unfair Prejudice Petition, Shareholders' Agreements, Directors' Duties, Good Faith in Contracts, Removal of Directors, Interpretation of Company Constitution
Company Law Unfair Prejudice Petition Shareholders' Agreements Directors' Duties Good Faith in Contracts Removal of Directors Interpretation of Company Constitution

Case Brief

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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

Civil Appeal (companies/shareholder Dispute) / Court of Appeal Judgment on Appeal

Legal Issues

  1. 1 Whether the majority shareholders and their nominee directors conducted the affairs of the company in a manner unfairly prejudicial to the minority shareholders under section 994 of the Companies Act 2006
  2. 2 Whether the obligation of good faith in the shareholders' agreement restricted the majority shareholders' right to remove directors and control management
  3. 3 Whether the 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 obligation of good faith in the shareholders' agreement did not entrench Dr. Sachs and Mr. Faulkner as directors or prevent the majority shareholders from exercising their statutory rights to remove them. The shareholders' agreement did not form part of the company's constitution for the purposes of directors' duties under section 171(a). The actions of the Investors and their nominee directors were not unfairly prejudicial within the meaning of section 994 of the Companies Act 2006, as there was no breach of contract or directors' duties, and no financial prejudice to the Minorities.

Court Disposition

Appeal allowed; Respondents' Notice dismissed.

Orders

  • The appeal is allowed; the findings of unfair prejudice and breach of duty are set aside.
  • The Respondents' Notice is dismissed.