Default Statutory Rules Governing Equal Joint Venture Voting Impasses
Statutory default rules resolve equal joint venture voting impasses through negative preservation, status quo lock, custodianship, and court liquidation.
UK Companies Act 2006 Section 994
Meaning
Statutory remedies in corporate law provide protection for members of a company against actions that harm their investment. This specific protection, found in UK Companies Act 2006 Section 994, allows shareholders to petition the court if the company’s affairs are conducted in an unfairly prejudicial manner. It applies only to companies registered in the United Kingdom.
Unfair Prejudice
Minority shareholders often suffer when the majority uses their voting power to extract undue benefits. Petitions under uk companies act 2006 section 994 occur when the majority shuts out the minority from management or fails to distribute dividends. The court assesses whether the conduct breached the company’s articles or the informal agreements between the founders.
This test helps identify unfairness in the management.
Judicial Remediation
The court has wide discretion to fashion a remedy that resolves the conflict. Under uk companies act 2006 section 994, the court can regulate the future conduct of the company or order the purchase of the petitioner’s shares. The most common remedy is ordering the majority to buy out the minority.
This resolution allows the petitioner to exit.
Valuation Basis
Valuing the petitioner’s shares usually requires determining their fair value without a minority discount. This prevents the majority from benefit from their own unfair conduct. The valuation is set at a date close to the court hearing.