So what do Owen Oyston and Terry Venables have to do with me?Unless you are an ardent Blackpool FC fan you are unlikely to have read the 457-paragraph judgement in the case brought against the Oystons for unfair prejudice of their co-shareholder.
(It had echoes of the infamous High Court shareholder dispute concerning Terry Venables and Alan Sugar over Tottenham Hotspur FC – in this case El Tel was left with a large legal bill running into hundreds of thousands, whilst Sugar ended up with a club worth over £100 million!)You probably thought that that case had no relevance for you either?
Well, if your company has a number of shareholders, but no Shareholders Agreement and the Articles of Association came ‘free’ with the £99 Company formation kit you signed up for 10 years ago, then you really ought to read on.Fact. Shareholders often fall out. Often one cuts the other out of information and decision-making. Or they get greedy and want a larger share of the profits. Some use the Company as their personal bank account. All shareholders think that it’s “their company” and cannot agree on a direction. Some have just had enough and want to exit but cannot agree on what their shares are worth. Husband and wife shareholders may split and family companies may not want the wayward son of a deceased shareholder coming onto the board.
And, whether or not a minority shareholder has been “oppressed” within the strict meaning of Section 994 of the Companies Act 2006, as soon as a shareholder owning less than 50% of a company has a problem and consults their lawyers they will pretty soon be threatening a Court Petition under this legislationThis action will almost inevitably focus the minds of the different parties and help them reach an out of court settlement.
Of course, such cases are expensive, protracted and usually acrimonious. They are fought out whilst the Company is still trading and can have a hugely detrimental effect on the company’s performance as the wrangling goes on.But it can all so easily be avoided by sitting down and negotiating A Shareholders Agreement or tailored Articles (or both) at an early stage, whilst relationships are still rosy and the MBO is still exciting. If nothing else – agree what happens if one shareholder wants to exit and a method of valuing the shares. Lawyers don’t retire on the back of drafting agreements – but they might if they were acting in the case against Alan Sugar or the Oystons!