As a shareholder in a company you expect to be treated fairly. But if the majority shareholder acts in a way that harms your rights you may be unfairly prejudiced. This is a statutory remedy under the Companies Act 2006 so you have protection if you’ve been treated unfairly in how the company’s affairs are run.
The Basics
So what is unfair prejudice? In short it’s when the conduct complained of is both unfair and damaging to your position as a minority shareholder. It usually involves directors or other shareholders acting against the articles of association, your shareholders agreement or principles of fairness.
You can bring an unfair prejudice petition to the court if you think the act complained of goes over the line.
Common Examples
Some common examples of unfairly prejudicial conduct include:
Being excluded from decision making or denied access to management information.
Share dilution used to give others more control.
Paying directors too much instead of using company profits to pay dividends.
Misuse of company assets or company funds.
Acts done in bad faith, such as diverting contracts to connected parties.
These are not minor squabbles. They are serious forms of unfair behaviour that can cause financial loss.
Why It Matters for You
Your petitioner’s shares represent your investment and your voice. If you’re excluded or sidelined your interests suffer. That’s why unfair prejudice claims exist: so you can act when the court thinks the conduct is unfair.
When Can You Bring an Unfair Prejudice Petition?
You can petition the court if you think the company is acting unfairly. The court applies an objective test, is it unfair to a reasonable observer?
Note not every commercial dispute counts. If a petitioner won’t cooperate or objects to future plans without real harm the claim may fail.
Typical Situations
Disputes often arise in:
A family business where personal ties intersect with company decisions.
A quasi partnership in which reliance and fairness are regarded as essential.
Commercial litigation over a proposed act or civil proceedings connected to the company’s capital.
Disagreements with other members about future conduct or exclusion from prospects.
Every matter is judged on a case by case basis and the court has wide discretion to determine what counts as fair.
Remedies Explained in Plain English
If your unfair prejudice petition succeeds the court’s orders can be far reaching. The most common outcome is a buy out where the majority must purchase your shares at a fair value. Other options include:
Preventing the future conduct that is unfair.
Setting aside the act complained of.
Altering how decision making takes place within the association.
Protecting your position so you are not placed at a disadvantage compared with other shareholders.
The court can also address unfair treatment connected to the company’s articles or earlier civil proceedings, exercising its powers to do justice.
Examples
Here are several examples of unfair prejudice in action:
A minority shareholder in a family business is excluded from profits while the majority shareholder draws excessive remuneration.
Directors divert or misuse company assets, leaving non members exposed to harm.
A proposed act involving the issue of new shares dilutes ownership, giving greater control to a particular group of other members.
Each situation shows how unfair conduct can have lasting effects.
Checklist: Unfair Prejudice
Consider these points:
Are you excluded from meetings or denied access to management information?
Have you noticed inappropriate use of funds or company assets?
Have you been affected by share dilution or inequitable decision making?
Do you believe the conduct complained of was done in bad faith?
Has the company acted against the articles of association or your shareholders agreement?
If so you may have grounds to bring an unfair prejudice petition.
Immediate vs Non-Immediate Issues
Some issues need to be addressed now, for example:
Poor management of the company’s capital.
Actions that risk financial loss.
Others, like smaller disputes over how to pay dividends, may allow scope for negotiation. Knowing when to escalate a claim helps you decide the best way forward.
Common Mistakes to Avoid
Shareholders sometimes weaken their own position by:
Failing to preserve records of the conduct complained of.
Thinking every commercial dispute is prejudice.
Ignoring the articles of association or shareholders agreement.
Assuming they have an automatic right to win without evidence.
Avoiding these mistakes puts you in a stronger position if civil proceedings follow.
Unfair prejudice is not about everyday squabbles. It’s about unfairly prejudicial conduct that breaches your rights under the Companies Act 2006. If you’ve been excluded, sidelined or harmed by inequitable conduct you can act. With solid evidence and a clear strategy you can protect your position and get justice.
FAQs
How do I prove unfair prejudice?
You’ll need evidence of the act complained of, such as emails, meeting minutes or financial documents. The objective test applies to the court’s evaluation.
What are the remedies?
The court’s orders can include a buy out, preventing future conduct or reversing inequitable decision making. The court has wide discretion.
What’s the difference between unfair prejudice and a derivative claim?
Unfair prejudice is about you as a shareholder. A derivative claim is about wrongs against the company itself.
Can it apply in a family business?
Yes. Many cases arise in family businesses or quasi partnerships where personal ties and fairness are important.
How long does a claim take?
Timescales vary. Some matters resolve quickly, others involve complex commercial litigation or civil proceedings which can take months or more.