| COMPANY — Oppression — Conduct of affairs — Private family company — Order for purchase by respondent majority of minority petitioners’ shares — Whether shares to be valued pro rata or on a discounted basis — Companies Act 1985, s 459
Irvine and another v Irvine and another [2006] EWHC 583 (Ch)
Ch D: Blackburne J: 23 March 2006
When valuing a minority shareholding in a limited company following a buy-out ordered by the court under s 459 of the Companies Act 1985, the shares should be valued on a discounted basis unless there were exceptional circumstances.
Blackburne J so held when determining that the petitioners, Mrs Patricia Mary Irvine and Mr Michael Cleobury Thatcher (as trustee of a settlement for the benefit of Mrs Irvine’s children), who had together owned together 49.96% of the shares in the second respondent family company, Campbell Irvine (Holdings) Ltd, were not entitled to a pro-rata, non-discounted value for their shareholding, after the first respondent, Mr Ian Charles Irvine, had been ordered to buy-out the petitioners’ shareholding under s 459 of the Companies Act 1985, on the ground that the company’s affairs had been conducted in a manner unfairly prejudicial to the interests of the petitioners. The first respondent owned merely one more share in the company than the petitioners.
BLACKBURNE J said that although the legislation did not stipulate how the valuation should be made following a buy-out order for a minority shareholding under s 459, all the authorities in which the question had been raised concerned quasi-partnerships, not limited companies. In such cases, for example, In re Bird Precision Bellows Ltd [1984] Ch 419; [1984] 2 WLR 869, the overriding requirement was that the price to be paid should be fair, and that, in general, the valuation would be on a non-discounted, pro rata basis to reflect the nature of the business relationship (that of a “quasi-partnership”). However, a minority shareholding in a company, even one where the extent of the minority was slight, was to be valued for what it was, a minority shareholding. Short of a quasi-partnership or some other exceptional circumstance, there was no good reason to accord to it a quality which it lacked. In the instant case, since the company was not a quasi-partnership, nor were there any exceptional circumstances, the shares had to be valued at a minority discounted rate.
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