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Minority shareholder stops company issuing new shares

Posted: 17th December 2019   In: Corporate Commercial

A minority shareholder has been granted an interim injunction preventing a company from issuing new shares and loan notes.

The applicant in the case had a minority shareholding in Brickvest Ltd (2019).

There was a shareholders' agreement specifying that certain matters required the applicant's written consent, including the allotment of shares.

The applicant sought an injunction preventing Brickvest from issuing new shares and loan notes, which it was planning on releasing the day after the court hearing.

The applicant's case was that the proposed issue of new shares was contrary to the terms of the shareholders’ agreement, as written consent was required from the applicant but had not been received.

The applicant also applied to rectify the company’s accounts in the register of companies because it had not approved them as required in the agreement.

The court held that there had been a breach of the agreement and that was enough for the court to grant an injunction preventing the issue of new shares or loan notes.

There would be prejudice to the applicant that could not be compensated for in damages if the injunction was not granted.

There was no converse prejudice to the company if it was found that an injunction had been wrongly made. It was to the company’s advantage that the court was taking steps to stop it doing something unlawful.

As for the accounts, the applicant had not approved them due to its concerns and it would be completely inappropriate to allow them to remain on the register.

However, the court gave the company seven days to rectify the accounts. Otherwise, they would be removed.

Please contact Sing Li if you would like more information about the issues raised in this article or any aspect of company law.

 

 

Posted by: Sing Li
Corporate Commercial
Luton Office