UK: England and Wales: unfair prejudice, directors’ duties and absence of a dividend policy

This post, UK: England and Wales: unfair prejudice, directors' duties and absence of a dividend policy,  by noreply@blogger.com (Robert Goddard), first appeared on  at http://corporatelawandgovernance.blogspot.com/.

Judgment was given earlier this week in Routledge v Skerritt & Ors [2019] EWHC 573 (Ch). A first instance decision involving a petition for unfair prejudice, brought by a shareholder under Part 30 of the Companies Act 2006, would not – now at least – attract much attention. There have been many of them and the core principles are well settled, not least since O’Neill v Phillips [1999] 1 WLR 1092, which celebrates its twentieth anniversary later this year.

This particular judgment is, however, noteworthy for several reasons. Perhaps the most important of these is that it provides an example of directors found to have breached their duty to promote the success of the company under section 172 of the Companies Act 2006. Such cases do not abound. Specifically, the directors’ failure to adopt a valid dividend policy was seen as a failure on their part to have regard to “the need to act fairly as between members of the company” as required under section 172(1)(f). A second reason is that the judgment provides an illustration of the consequences for shareholder rights – and how these are determined – where the board failed, as required, to adopt the dividend policy.

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