Shareholder Disputes: Updates To The Landmark Case Of THG Plc vs Zedra
The landmark case of THG Plc vs Zedra [2024] previously found that unfair prejudice petitions were subject to statutory limitation periods under the Limitation Act 1980.
However, following the case’s escalation to the Supreme Court in 2026, the decision has been reversed.
What Is An Unfair Prejudice Claim?
Unfair prejudice petitions allow the court to intervene most commonly on behalf of a minority shareholder if that shareholder believes the affairs of the company are being conducted in a manner that goes against – ‘unfairly prejudices’ - their interests.
This might involve excluding them from management or decision-making, diversion of corporate opportunities, mismanagement of corporate assets that unfairly impacts them, breach of fiduciary duties by majority shareholders and/or directors.
Many cases involving unfair prejudice petitions will be brought to court under Section 994 of the Companies Act 2006.
When the case initially came to the Court of Appeal in 2024, the Court of Appeal reversed 40 years of established precedent: their ruling confirmed that unfair prejudice claims brought under Section 994 should be subject to the Limitation Act 1980. This meant that the majority of unfair prejudice petitions had to be brought to court within 12 years of the issue arising.
However, when the case was escalated to the Supreme Court on appeal, the majority held that this was an incorrect interpretation.
How Has The Supreme Court’s Decision Changed?
The Supreme Court ruled that limitations - requiring shareholders to bring a claim for unfair prejudice within 12 years of the issue occurring - do not apply to claims brought under Section 994.
Now, there is no strict time limit to bring an unfair prejudice petition. However, delays can still hurt the petition, as the court may conclude that the shareholder ‘acquiesced’ (accepted the situation) if they knew about the problem but did not attempt to find a resolution in a timely manner.
The ruling has clarified that delays do not automatically invalidate an unfair prejudice petition, but that waiting to bring the case to court could weaken the chances of success.
What Does This Mean For Businesses?
The Supreme Court’s ruling means that historical actions can still be challenged: shareholders may bring complaints about previous decisions such as share dilution, exclusion from share issues, dividend policy, and/or removal from management but it is advisable not to leave it too long before taking specialise advice.
Minority shareholder claims may increase and there may be a rise in historic claims being brought forward from minority shareholders, trustees, and family business shareholders seeking relief for older grievances.
What Can Companies Do?
To ensure your business and its shareholders are protected from unfair prejudice claims as much as possible, record keeping and adherence to proper governance is key.
Check that all record keeping is up-to-date, with Board minutes logged and shareholder approval processes followed. Any major decisions ought to have written explanations saved, with evidence of shareholder agreements kept.
What is more, businesses ought to take note of how long this case has taken. The businesses involved have been embroiled in lengthy court battles and expensive litigation, the time and efforts for which could have been better spent elsewhere.
Business should consider shareholder agreements, and when drawing up these agreements, always consult an expert Solicitor to support you in delineating exact rights, responsibilities and decisions. This will ensure the business maintains accountability and transparency, making any potential shareholder disputes easier to resolve.
If you would like advice and guidance on what this ruling could mean for you or your business, or you would like to speak to a legal expert about shareholder agreements, contact our team today. Email andrew.meech@jcpsolicitors.co.uk or call 03333 208644.