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The minority shareholder with a major claim!

In one of the biggest disputes of 2017, the President of Blackpool Football Club, Valerie Belekon, has brought a claim for unfair prejudice via his company, VB Football Assets, against the majority shareholders of Blackpool FC, the Oyston family.  He is seeking an order for the buy out of his shares.  If such an order is made, it is expected to lead to the sale of Blackpool FC to a new owner, which would be popular with fans whom are currently boycotting the club under the Oyston ownership.

Section 994 of the Companies Act 2006 provides that a shareholder can apply to the Court on the ground that the company’s affairs have or are “being conducted in a way which is unfairly prejudicial to the interests of its members generally or some part of its members, or that any actual or proposed act or omission would be so prejudicial “.

VB Football Assets’ complaint is that it had a legitimate expectation of participating in the management of the company as a “quasi partnership” between it and the Oyston family’s company, and that it was excluded from key decisions information and a share of profits.  It also claims that circa £10 million was misappropriated from the company by the Oyston family following the club’s promotion to the Premier League in 2010.

The Court has wide discretion to grant relief for the unfairly prejudicial action.  Final orders often provide that one party must purchase the other party’s shares in the company either at a price fixed by the court (usually after hearing expert evidence in respect of the value) or fixed by an independent valuer on bases to be determined by the Court.  The Court will ensure that the price fixed takes account of the damage done to the value of the petitioning shareholder’s shares by the unfairly prejudicial conduct.  This can be by requiring a valuation of the company at a date before the unfairly prejudicial action occurred.

Following the promotion to the Premier League, Blackpool Football Club’s fortunes have nose- dived and it has suffered two relegations and is currently in League 1.  Consequently the value of VB Football Assets shares will be significantly lower now than in 2010 when the club was in the Premier Division.  

If VB Football Assets’ complaint is upheld by the High Court, it may be that the Court will fix the date for valuation of its share in the Club at a date prior to the misappropriation of assets at the time of the promotion to the Premier League.  The judgment may not be handed down until October, so this remains to be seen.  However, the case highlights the issues which many shareholders in smaller companies face and the remedies which may be available to them when majority shareholders exercise their voting power unfairly.

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