Minority Shareholder Protection: Unfair Prejudice Petition

Minority Shareholder Protection: Unfair Prejudice Petition

 

A minority shareholder may bring a claim (an Unfair Prejudice Petition) when the company has been or is being managed in a way that is 'unfairly prejudicial' to some or all of its shareholders.

 

Under section 724(1) of the Companies Ordinance (Cap 622), a member (i.e. shareholder) of the company may file an Unfair Prejudice Petition into the Court to apply for order or relief under section 725 and section 726 of the Companies Ordinance (Cap. 622) as mentioned below:

(a) the company’s affairs are being or have been conducted in a manner unfairly prejudicial to the interests of the members generally or of one or more members (including the member); OR

(b) an actual or proposed act or omission of the company (including one done or made on behalf of the company) is or would be so prejudicial.

 

Possible remedies granted by the Court for an Unfair Prejudice Petition:

According to Section 725(2) and Section 726 of the Companies Ordinance (Cap. 622), the remedies which the Court may grant include:-

• An order restraining the continuance of the conduct of the company’s affairs mentioned in the Unfair Prejudice Petition;
• An order that legal proceedings be brought in the company’s name as the Court thinks fit;
• An order appointing a receiver or manager of the company’s business or property;
• An order for regulating the conduct of the company’s affairs in future;
• An order for the purchase of shares of any member of the company by another member of the same company;
• An order for the purchase of shares of any member by the company and the reduction accordingly of the company’s capital;
• An order for the company or any other person to pay damages to a member of the company whose interests have been unfairly prejudiced by the conduct of the company’s affairs or by the act or omission;
• An order for alteration of the company’s articles of association.

 

For legal advice or services on shareholder’s disputes and shareholder’s rights protection, please contact CHOW & CHEUNG [cac@ccsn.hk  / +852 2856 3799]

www.ccsn.hk