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In the Matter of McCarthy Surfacing Ltd (2006)

Summary

Shareholders who had executed share transfers but were still the registered holders of the shares had requisite standing to bring a petition under the Companies Act 1985 s.459. Transferees of shares who had not been registered as shareholders by the company also had the requisite standing to bring a petition.

Facts

A preliminary issue arose in proceedings brought by the petitioners under the Companies Act 1985 s.459 against the respondents. The first and second petitioners (H) and the first to third respondents (S) were shareholders in the fourth respondent company. H had executed a transfer of their shares to the third petitioner (M). M's request for registration as a shareholder was refused by the company in accordance with its discretion under the company's articles. H remained the registered shareholders. H and M subsequently presented a petition under s.459 alleging that the company had failed to consider making distributions to shareholders. The preliminary issue that fell to be determined was whether the petitioners had the requisite standing to maintain the petition. H contended that they had standing to bring the petition under s.459(1) of the Act as they were members of the company within the definition in s.22 of the Act. M submitted that whilst he was not a member of the company he had received a transfer of shares and therefore satisfied the requirements of s.459(2) of the Act. S submitted that s.459 required that a petitioner's interests had been unfairly prejudiced by the actions of the company, yet neither H nor M could claim that their interests had been unfairly prejudiced because H had divested themselves of their beneficial interests in the shares and M had been refused registration as a member of the company and had no prospect of being registered.

Held

(1) H remained the registered holders of the shares after their transfer to M, and therefore, as members, they had standing to make a claim under s.459 of the Act. There was no general proposition that every member that sold his shares but remained registered as a member would inevitably be unable to show prejudice, Atlasview Ltd v Brightview Ltd (2004) EWHC 1056 (Ch) , (2004) BCC 542 and Baker v Potter (2004) EWHC 1422 (Ch) , (2005) BCC 855 considered. (2) In relation to M, the company's refusal to register him as a member was not equivalent to cancellation of the shares transferred by H and would not deprive M of standing. A transferee of shares, whose name had not been entered in the register of members, satisfied the formal requirements in respect of standing, otherwise s.459(2) of the Act would have no effect. The voting rights remained attached to the shares and M would be entitled to direct how those rights were to be exercised. Likewise if a dividend was declared M would be entitled to receive it. Consequently, H and M all had standing to maintain the petition.

Preliminary issue determined.

Chancery Division
Sir Francis Ferris
Judgment date
12 April 2006
References

​LTL 24/4/2006

Practice areas