engagement with the text applying appropriate knoweldge and UK legislation and case law, OSCOLA referncing
WeDeliver Ltd is a small and successful haulage business originally made up of three shareholders who are also the three directors. They are Barney, Wilma and Fred. The shares are held by Barney 42%; Wilma 34% and Fred 24%. They have all worked together for more than a decade.
In 2020 it was decided to bring Suzie into the business (she is Barney’s daughter) and, to that end, it was decided to make an allotment of shares (£1 nominal value) on a rights basis, priced at par value. Fred did not want to acquire any more shares since he thinks the haulage business is rather exposed to business uncertainty at the moment so he did not take up the offer.
He has now discovered that, unusually, the shares were issued for a non-cash consideration. Apparently, that was agreed at a board meeting which Fred missed. Barney and Wilma paid for their additional shares by transferring a field which they own in Kent to the company which will use it as a lorry park, though most of their business is internal to the UK and they only carry export loads via Dover occasionally. Suzie paid for her shares by working for the company (she is a logistics expert) for 6 months for no salary. In neither case was an independent valuation (of the field or services) obtained.
The result of the rights issue is that the shareholdings now are Barney 48%, Wilma 37%, Suzie 5% and Fred has 10%.
In January 2021, the board (by a majority, Fred dissenting) decided to declare a dividend of £800,000 which exhausts all of the company’s available distributable profits. Fred is surprised by this decision since, for the previous two years, the board had declined to recommend the payment of any dividend, despite the company’s available profits increasing year on year.
Fred also thinks the shareholders are about to dismiss him from the board because of his persistent questioning of the conduct of the company’s affairs.
Fred is concerned by all of these developments and he asks you to advise him on whether he could petition successfully under CA 2006, s 994 and, if so, what relief he could obtain. Would your answer be different if the company was a public company?
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