What was in issue

Two minority shareholders in a family holding company alleged that the majority had, over nine years, moved value out of the company through undisclosed related-party transactions.

How it ran

The difficulty was proving a pattern rather than a series of individually defensible decisions. We obtained disclosure of the counterparties’ accounts and set the transactions against arm’s-length comparables year by year.

The result

The court found unfair prejudice made out and ordered a buy-out of the minority holdings at a valuation with no minority discount.

Unfair prejudice petitions are frequently a proxy for a personal falling-out between shareholders who can no longer work together. The legal question is narrower: whether the company’s affairs have been conducted in a manner unfairly prejudicial to a member’s interests.

What decided it

The exclusion from management was made out on the documents, but the valuation was where the real argument lay. We resisted a minority discount on the basis that the petitioner had been a quasi-partner, and the court accepted it.

Why it matters

Where a company is in substance a partnership, a departing member’s shares are more likely to be valued on a pro rata basis. That distinction is frequently worth more than the conduct findings themselves.