JKX Oil & Gas Plc & Ors v Eclairs Group Ltd
2014
COURT OF APPEAL (CRIMINAL DIVISION)
United Kingdom
CORAM
- LORD JUSTICE LONGMORE
- SIR ROBIN JACOB
Areas of Law
- Corporate Law
- Evidence Law
2014
COURT OF APPEAL (CRIMINAL DIVISION)
United Kingdom
CORAM
AI Generated Summary
The case involves JKX Oil & Gas PLC's directors imposing restrictions on significant shareholders to prevent them from voting at the 2013 AGM. The court found that the main purpose behind these restrictions was improper—primarily to disenfranchise the shareholders rather than enforce compliance with information requests—rendering the action invalid despite the directors' good faith intentions. The court ruled on issues related to validity of disclosure notices, reasonableness of directors' beliefs, and proper exercise of fiduciary powers.
Judgment
Lord Justice Briggs :
Introduction
These appeals, against orders of Mann J on 1 st October 2013 in two conjoined claims, raise important issues as to the validity and constitutionality of restrictions imposed by the directors of JKX Oil & Gas PLC (“JKX”) pursuant to Part 22 of the Companies Act 2006 (“the 2006 Act”) and the company’s Articles of Association (“the Restrictions”). The Restrictions included the purported disenfranchisement of two of JKX’s shareholders, registered as the holders of 27.55% and 11.45% of the company’s ordinary shares, for the purposes of voting at JKX’s Annual General Meeting on 5 th June 2013. I say ‘purported’ because, at the expedited trial of the conjoined claims by the beneficial owners of those shareholdings, Mann J declared that the Restrictions had been ineffective because the directors had, in imposing them, been motivated by an improper purpose.
Part 22, headed “Information about Interests in a Company’s Shares” contains, at sections 793 to 802, provisions enabling a public company to obtain information about interests in its shares, from anyone whom the company knows or has reasonable cause to believe to be, or to have been within a specified period, interested in those shares. Non-compliance with a notice requiring the provision of such information is a criminal offence. Further, the company may seek court orders imposing restrictions on transfer, voting and the payment of dividends in respect of shares in which the defaulter is interested.
Many public companies, including JKX, supplement that statutory regime by bespoke provisions in their articles of association. In the present case, JKX’s Article 42 contains provisions enabling the company by its directors to impose one or more of a set of restrictions upon defaulters similar to those in Part 22, but without having to go to court. In addition, Article 42 enables the company to treat information requested as not having been provided in circumstances where its Board knows or has reasonable cause to believe that the information actually provided is false or materially incorrect. It was pursuant to the powers conferred on the directors by Article 42 that the Restrictions were purportedly imposed in the present case.
The two registered shareholders immediately affected by the Restrictions were nominee companies. The claimants in the conjoined claims were the beneficial owners of the shares, namely Eclairs Group Limited (“Eclairs”) and Glengary Overseas L