The petitioning shareholder was a retired partner and minority shareholder of Charterhouse Capital Limited (the Company) which, through various subsidiaries and limited partnerships, carried on a private equity business. He brought a petition for unfair prejudice against the Company and its other shareholders and directors under section 994 of the Companies Act 2006, in which he claimed that the affairs of the Company had been conducted in a manner which was unfairly prejudicial to his interests as a shareholder.
Following a management buyout in 2001, the petitioner was an original shareholder (or Founder) of the Company and entered into a Shareholders Agreement with the other founding shareholders in the Company.
The original articles contained drag provisions permitting a buyer who had acquired 50 per cent or more of the voting rights in the shares in the Company as a result of a general offer to require any other shareholders who had not accepted the general offer to sell their shares.
In January 2008, the petitioner gave notice of retirement and ceased to be a director, although he retained his shareholding in the Company. Following his resignation, a number of the other Founders retired or left the Company. Their departure gave rise to concerns about a misalignment between the identity of the Company’s shareholders and those who were actively managing the business, as this could cause difficulties with investors when raising funds.
To address this, the active executives set up a company in order to purchase the shares in the Company from its existing shareholders. In around September 2011, an offer price for those shares was finalised at £15.15 million. The offer to purchase was conditional upon a number of factors, including that amended Articles be adopted by the Company.
The key amendments to the Articles included: (i) the removal of a requirement for a ‘General Offer’ to comply with the City Code on Takeovers and Mergers; (ii) the introduction of another majority drag provision; and (iii) the alteration of the definition of ‘Founder Majority’.
By December 2011, with the exception of the petitioner, all of the non-continuing shareholders had accepted the offer. The transfer of all shares in the Company (other than those held by the petitioner) took place in February 2012. In April 2014, the petitioner presented a petition for unfair prejudice. He alleged that the offer, the amendment of the Articles and the manner in which the offer was dealt with by the Company were carried out improperly in order to expropriate the petitioner’s shares at a gross undervalue rather than for any genuine purpose.