A recent High Court case, Harrington v Harrington & another, IEHC 751, has provided some guidance to shareholders and companies in relation to litigation under Section 212 of the Companies Act 2014 (“Section 212”).
Section 212 is stated to be a “protection for minorities” in the context of the shareholding of a company. It provides a course of action for members of a company where either the affairs of the company or the powers of the directors of the company are being conducted or exercised in a manner oppressive to that member or in disregard of a member’s interest. One of the attractions of Section 212, from an applicant’s perspective, is that where the conditions of the section are satisfied, the remedies available to court can be wide ranging, including:
- directing or prohibiting any act or cancelling or varying any transaction;
- ordering the payment of compensation;
- regulating the conduct of the company’s affairs in future; and
- ordering the purchase of that member’s shares by other members or by the company.
Harrington v Harrington involved two brothers who were the main shareholders in a mussel farming company. The applicant, Flor Harrington, claimed he had been excluded from participation in the business, and that the affairs were being conducted in a manner which was oppressive to him. The applicant requested that the first respondent, his brother John Harrington, buy his shares in a manner supervised by the court, which the respondent agreed to in principle, however there was a disagreement as to the proper valuation of the company. Neither party wished the company to be wound up.
In order to save costs associated with the litigation the first respondent applied to court for an order directing the appointment of an independent professional valuer to value the applicant’s shareholding. The court observed that the first respondent was seeking to “nip in the bud” the oppression action being taken by his brother, while denying that his brother had in fact been oppressed.
The court was sympathetic to the first respondent’s efforts to save costs, but it declined to make the requested order. It felt that it was not just or fair to the applicant to fix him with an expert valuation into which he would have no input.
This judgment makes it clear that either a finding of oppression or a concession of technical oppression is required before the court can exercise its extensive powers to make an order under Section 212. Since no finding of oppression was made and the first respondent was reluctant to concede technical oppression, the remedies available under Section 212 (including an order directing an independent valuation of the shares) were not available.
Contributed by: Paul McNamara
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