United Co Rusal Plc v Crispian Investments Ltd (2018)


There was no reason to apply any special principles of interpretation to a shareholders' agreement which provided for a right of first refusal in the event of a disposal of shares by one of the investors, notwithstanding that the terms of the agreement in relation to the rights attached to shares differed from those in the company's articles of association.


The court had to consider whether the first defendant (D1) had validly commenced a right of first refusal (ROFR) procedure contained in a shareholders' agreement made between the claimant (C) and the defendants.

The shareholders' agreement governed the relationship between the parties in their capacity as the major shareholders of a listed company. Clause 2.5 provided for a share lock-up period after which C and the second defendant (D2) were permitted to buy out each others' shares and D1 was permitted to sell its shares after first offering them to C and D2, pursuant to cl.2.5(5), on the terms of a "bona fide offer from a third party". After the expiry of the lock-up period, D2's affiliate (B) offered to purchase 3.99% of D1's shareholding in the company. D1 entered into a conditional sale and purchase agreement with B and purported to commence the ROFR procedure by written notice to C and D2. By the notice, D1 offered to sell its 3.99% stake in the company for the same price as it had conditionally agreed with B. The offer was made on the basis that the price had been proposed by a "bona fide third-party purchaser". C challenged the validity of the notice, claiming that the ROFR procedure was engaged only by an offer from an independent party and not from any of the major shareholders. According to C, D1's right to offer the shares at the price proposed by a bona fide third-party purchaser did not extend to offering them at a price proposed by D2 or its affiliate. The defendants' position was that the reference to the purchaser being a "bona fide third party" denoted no more than that the offer had to be from a party unrelated to D1 and did not exclude offers from C or D2.

The defendants argued that the principle in Greenhalgh v Mallard [1943] 2 All E.R. 234, namely that a share was personal property and prima facie transferable, applied in the instant case and that the Court of Appeal in Coroin Ltd, Re [2013] EWCA Civ 781 had referred to that principle in the context of interpreting a shareholders' agreement.


Interpretation of shareholders' agreement - The shareholders' agreement in Coroin was very different to that in the instant case, since the share transfer terms in the Coroin agreement mirrored those in the company's articles of association. By contrast, the instant case concerned a subsequent agreement between some of the shareholders to introduce restrictions not contained in the articles, Coroin distinguished. The reference to the Greenhalgh principle in Coroin did not bind the instant court to apply that principle to the shareholders' agreement in the instant case, Greenhalgh considered. Therefore, there was no reason why that agreement should be subject to any special principles of interpretation. The usual principles applicable to commercial contracts applied, Rainy Sky SA v Kookmin Bank [2011] UKSC 50 and Arnold v Britton [2015] UKSC 36 followed. The language of the shareholders' agreement made it clear that the ROFR was a singe right granted to both C and D2, to be exercised by both or neither of them. Even if it had been granted severally, it was difficult to regard either of them as a bona fide third-party purchaser within the meaning of cl.2.5(5), since the natural and ordinary meaning of the words obviously excluded the parties to the grant and their affiliates. Thus, neither D2 nor C was permitted, directly or through an affiliate, to purchase shares from D1 other than by exercise of the ROFR. Moreover, the commercial context of the agreement, recognising that the ROFR was designed to give C and D2 a right to buy-back rather than find themselves with a replacement independent investor, supported an interpretation of the ROFR which required an executed conditional contract to trigger its operation (see paras 42-43, 48-52, 60, 64, 67, 75-76, 145 of judgment).

Contents of notice - Even if B's offer could, in principle, constitute an offer from a bona fide third-party purchaser for the purposes of the ROFR mechanism, the "right" purportedly granted by D1 was fundamentally different from that stipulated by cl.2.5(5) because it did not grant an unconditional right to purchase a pro rata share, but only allowed each grantee to exercise the right offered by entering into a contract obliging it to purchase the full stake if the other did not exercise its equivalent right (paras 77, 80)

Bona fide price - B's offer was not at arm's length, but was at an inflated price due to being related to other transactions between the defendants. It was therefore not an offer from a bona fide third party within cl.2.5(5) (paras 143, 146).

Validity of notice - The notice was invalid and D2 was precluded from disposing of shares pursuant to it (para.147).