A new High Court decision provides some pointers about injuncting the exercise of compulsory transfer provisions (Hersov v Energy Research Lab [2024] EWHC 2604 (Ch)):
1. Where the articles appoint the company as agent to progress the sale of shares, the desire to bring a (viable) unfair prejudice petition can form the basis for an interm injunction to prevent the company from so doing pending the issue and determination of the petition.
2. The applicant will need to proceed with speed, and any delay will need to be explained.
Here an application had been made 2 months after the applicant had been informed that his employment would not be continuing and many weeks after he had been informed that his shares would be transferred. At the last minute the applicant had made an urgent application. Only short notice had been given to the company so the duty of full and frank disclosure applied just as it would on a w/o notice application. That duty had not been complied with as the applicant had failed properly to explain the delay to the original judge. The judge on the return date discharged the injunction on the basis of material non-disclosure.
3. The judge, who made clear he had heard no argument on the same, was not prepared simply to accept as correct two recent ICC Judge decisions indicating that a petitioner may continue with their petition even if they cease to be a shareholder post-presentation of the petition. The judge indicated that these ICC judge decisions would not prevent a subsequent ICC or High Court judge taking a different view as to whether a petition could continue.
4. On the particular terms and mandatory timeline within the bad leaver provisions, the injunction might mean the other shareholders lost their rights to acquire the petitioner’s shares. The court felt that this could be compensated for in damages on a cross-undertaking with a valuation of the shares being ordered for that purpose. Hence, the court indicated (obiter), that damages could have been an adequate remedy for the other shareholders and the injunction would not have been refused in this basis.
(This last aspect seems wrong where (as here) one is dealing with shares in a private company. If the other shareholders might have been prevented from acquiring the shares at all due to the injunction that could not adeqately be compensated for in damages. It would be preferable (at a minimum) for the court in such circumstances to require an undertaking from the claimant that if they lost they would consent to a transfer despite the timetable in the articles not being followed; ideally all shareholders and the company would reach agreement on this front.)
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