MI Squared Ltd v King & Ors [2022] EWHC 331 (Comm) (16 February 2022)

MI Squared Ltd v King & Ors [2022] EWHC 331 (Comm) (16 February 2022)

The contractual restrictions in the Shareholders Agreement are subject to the directors' overriding fiduciary duties, especially in insolvency. The decision to enter into the Proposed New Loan was at least one reasonable option open to the directors in the interests of creditors. The balance of convenience did not favour granting the injunction, as administration would likely have more adverse consequences for the operating subsidiaries and stakeholders. The applicant failed to show that the directors were mandated by their duties to act otherwise or that they acted for an improper purpose.

Citation
[2022] EWHC 331 (Comm)
Parties
Claimant: MI Squared Limited; Defendant: Jeremy King; Defendant: Christopher Corbin; Defendant: Zuleika Fennell; Defendant: Robert Holland; Defendant: Corbin & King Limited; Interested Party: CK Opportunities Fund I, LLP
Jurisdiction
England and Wales
Judgment Date
16 February 2022
Procedural Posture
Application Under S.44 Arbitration Act 1996 for Urgent Injunctive Relief / Interim Application for Injunction
Outcome
Application for injunction refused
Legal Topics
Injunctions, Shareholders Agreement, Directors' Duties, Arbitration Act 1996 S.44, Balance of Convenience, Fiduciary Duties, Insolvency
Commercial Law Company Law Arbitration Injunctions Shareholders Agreement Directors' Duties Arbitration Act 1996 S.44 Balance of Convenience +2 more

Case Brief

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Parties

MI Squared Limited

Claimant

Jeremy King

Defendant

Christopher Corbin

Defendant

Zuleika Fennell

Defendant

Robert Holland

Defendant

Corbin & King Limited

Defendant

CK Opportunities Fund I, LLP

Interested Party

Procedural Posture

Application Under S.44 Arbitration Act 1996 for Urgent Injunctive Relief / Interim Application for Injunction

Legal Issues

  1. 1 Whether the directors are contractually restrained by the Shareholders Agreement from entering into new indebtedness or encumbering assets without majority shareholder approval
  2. 2 Whether the directors' fiduciary duties override contractual obligations under the Shareholders Agreement in the context of insolvency
  3. 3 Whether the balance of convenience favours granting an injunction to restrain the proposed refinancing

Ratio Decidendi

The contractual restrictions in the Shareholders Agreement are subject to the directors' overriding fiduciary duties, especially in insolvency. The decision to enter into the Proposed New Loan was at least one reasonable option open to the directors in the interests of creditors. The balance of convenience did not favour granting the injunction, as administration would likely have more adverse consequences for the operating subsidiaries and stakeholders. The applicant failed to show that the directors were mandated by their duties to act otherwise or that they acted for an improper purpose.

Court Disposition

Application for injunction refused

Orders

  • No injunction granted
  • Costs reserved or to be determined