Arbuthnott v Bonnyman & Ors
2014
CHANCERY DIVISION
United Kingdom
CORAM
- MRS JUSTICE ASPLIN
Areas of Law
- Corporate Law
- Commercial Law
2014
CHANCERY DIVISION
United Kingdom
CORAM
AI Generated Summary
Geoffrey Arbuthnott, a minority shareholder in Charterhouse Capital Limited, alleged unfair prejudice under section 994 of the Companies Act 2006, claiming undervaluation and improper expropriation of his shares. The court found no unfair prejudice, stating that the failure to pay dividends was aligned with prior agreements and historical practices and that the amendments to the company’s Articles of Association were a necessary step for business alignment.
Judgment
Mrs Justice Asplin :
This case concerns claims of unfair prejudice under s.994 of the Companies Act 2006 made by the Petitioner, Mr Geoffrey Arbuthnott (“Mr Arbuthnott”), who is an 8.91% shareholder in the Nineteenth Respondent, Charterhouse Capital Limited (the “Company”).
The Company through various subsidiaries and limited partnerships carries on a well-known and very successful private equity business, trading under the name of “ Charterhouse ” (the “Business”). After a management buyout from the HSBC group in 2001 the original shareholders of the Company were also the principal executives of the Business. Over time a number of the original executives have retired or left and a misalignment between the shareholding in the Company and the identity of the active executives in the Business has arisen.
In January 2008, Mr Arbuthnott, one of the Founders, gave notice of retirement as a member of Charterhouse Capital Partners LLP (the “LLP”), the main operating entity in the group of companies and LLPs in which the Company is interested (“the Group”). The LLP acts as investment adviser for the private equity funds managed by the Group. At the same time as retiring as a member of the LLP, Mr Arbuthnott retired as a director of the Company and other subsidiaries. However, he retained his 900 A shares of £0.01 each in the capital of the Company.
On 11 November 2011, the Eighteenth Respondent, Watling Street Limited (“WSL”), a vehicle for the 1 st to 11 th Respondents who were also shareholders in the Company and the other active members of the investment management team, made an offer to acquire all shares in the Company for £15.15 million (the “WSL Offer”). The WSL Offer was accepted by all of the members of the Company (other than Mr Arbuthnott), and they transferred their shares to WSL in February 2012. It was a condition of the WSL Offer, amongst others, that those who accepted it should vote in favour of an amendment to the articles of association of the Company. This duly took place. WSL proposes to exercise drag provisions in the Articles of Association in their amended form in order to acquire Mr Arbuthnott’s shares. Mr Arbuthnott says that they would be better described as expropriation provisions.
In summary, Mr Arbuthnott raises four claims of unfair prejudice although there was some dispute as to whether these have been extended in the course of the proceedings, something to which I will return. In any event, the four main elements se