Company law query

Sparks

Hi guys. I'm trying to not ask for legal advice here, but I may be sailing close to the wind Please bear with me!

I'm trying to get an idea of how complicated and expensive it would be to take a case against a limited company under article 205 of the 1963 companies act. Has anyone heard of a similar case been taken in the high court before or have any idea about what's involved? Is it straightforward or is it one of those "aspirational" laws that could take weeks of deliberation?


Article 205, to save the clicking:

205.—(1) Any member of a company who complains that the affairs of the company are being conducted or that the powers of the directors of the company are being exercised in a manner oppressive to him or any of the members (including himself), or in disregard of his or their interests as members, may apply to the court for an order under this section.

(2) In a case falling within subsection (3) of section 170, the Minister may apply for an order under this section.

(3) If, on any application under subsection (1) or subsection (2) the court is of opinion that the company's affairs are being conducted or the directors' powers are being exercised as aforesaid, the court may, with a view to bringing to an end the matters complained of, make such order as it thinks fit, whether directing or prohibiting any act or cancelling or varying any transaction or for regulating the conduct of the company's affairs in future, or for the purchase of the shares of any members of the company by other members of the company or by the company and in the case of a purchase by the company, for the reduction accordingly of the company's capital, or otherwise.

(4) Where an order under this section makes any alteration in or addition to any company's memorandum or articles, then, notwithstanding anything in any other provision of this Act but subject to the provisions of the order, the company concerned shall not have power without the leave of the court to make any further alteration in or addition to the memorandum or articles inconsistent with the provisions of the order; but, subject to the foregoing provisions of this subsection, the alterations or additions made by the order shall be of the same effect as if duly made by resolution of the company, and the provisions of this Act shall apply to the memorandum or articles as so altered or added to accordingly.

(5) An office copy of any order under this section altering or adding to or giving leave to alter or add to a company's memorandum or articles shall, within 21 days after the making thereof, be delivered by the company to the registrar of companies for registration; and if a company fails to comply with this subsection, the company and every officer of the company who is in default shall be liable to a fine not exceeding £25.

(6) The personal representative of a person who, at the date of his death was a member of a company, or any trustee of, or person beneficially interested in, the shares of a company by virtue of the will or intestacy of any such person, may apply to the court under subsection (1) for an order under this section and, accordingly, any reference in that subsection to a member of a company shall be construed as including a reference to any such personal representative, trustee or person beneficially interested as aforesaid or to all of them.

(7) If, in the opinion of the court, the hearing of proceedings under this section would involve the disclosure of information the publication of which would be seriously prejudicial to the legitimate interests of the company, the court may order that the hearing of the proceedings or any part thereof shall be in camera.

Mortmain

As far as I recall, there have been a number of cases taken in this jurisdiction under the section relating to opression of shareholders and some have definately been successful. I can't recall the name off the top of my head but if you have a look in Courtneys Company law book it may give you an indication.

dermot_sheehan

Sparks wrote:

Hi guys. I'm trying to not ask for legal advice here, but I may be sailing close to the wind Please bear with me!

I'm trying to get an idea of how complicated and expensive it would be to take a case against a limited company under article 205 of the 1963 companies act. Has anyone heard of a similar case been taken in the high court before or have any idea about what's involved? Is it straightforward or is it one of those "aspirational" laws that could take weeks of deliberation?


Article 205, to save the clicking:

s. 205 of the Companies Act is I believe the most litigated section of the companies act, mainly due to the flexibility of the remedies offered. Referred to in Horgan v. Murray as akin to divorce proceedings

These cases are very costly due to the massive amount of evidence required. Cases to look at include Re: Greenore, Murph's Restaurant (though although a s. 213 petition did discuss whether to use a s. 205), Re Williams Group, Horgan v. Murray, Re: Via Networks, Re: Visiting Motorists Bureau

focusing

Expensive, and unlikely to settle.

And the discretionary nature of it is such that it's completelt unpredictable whether you'll win or lose, so a bit of a gamble.

It's a case where you're much better off if you can mediate a solution with your fellow members, rather than ending up spending your life savings on lawyers.

gabhain7's right, just like divorce cases...

Joey99

Hey Sparks,

You weren't looking for legal advice and I'm not offering it but the proceedings would certainly be expensive. A section 205 action is often used, (by someone with enough resources to make the 'bluff' work) as a bargaining chip because of the flexibility (and consequent uncertainty) of the remedy - as Focusing and Gabhain7 have already pointed out. That said, the reason it's used at all is because of its effectiveness in the right hands. Hope this is of help.

Joey