Unfair prejudice, Section 994 Petitions and forensic accountants

shareholders-social.jpg.jpg

What is Unfair Prejudice and a Section 994 Petition

Unfair prejudice occurs when the rights of shareholders in a company are violated or when their interests are harmed. This could include instances where minority shareholders are treated unfairly, excluded from decisions, denied information, or where the majority shareholders act in a manner that undermines the rights of minority shareholders.

A Section 994 petition is a legal recourse available to shareholders who believe they have suffered unfair prejudice. This provision empowers shareholders, typically minority shareholders, to petition the Court for relief if they feel that the company's affairs have been conducted in a manner that is unfairly prejudicial to their interests.

The Role of a Forensic Accountant

The most common remedy of a successful Section 994 Petition is for the Court to order that the majority shareholders buy the Petitioners' shares in the company. Furthermore, if the conduct complained of has adversely impacted the value of the company, the Court may order that the minority shareholding is purchased at a price that reflects the value of the company had the conduct complained of not occurred.

Therefore, instructing a forensic accountant to consider the company's value is imperative. A forensic accountant will contribute in the following ways:

1. Investigative Role

While a skeleton claim detailing the conduct complained of may have been put together before the instruction of a forensic accountant, forensic accountants delve into the company's financial records and identify anomalies/discrepancies that may have previously gone unnoticed. These issues may significantly impact the potential settlement of a case and/or the company’s value.

2. Valuation Impact

Often, the conduct complained of will impact the company's value. For example, if company funds have illegitimately been used to meet personal expenditure. However, there are also times when the conduct complained of will not impact the company's value. For example, suppose the company funds used to meet the personal expenditure are recorded in a director's loan account as owed to the company. In that case, there will be no impact on the company’s value.

Therefore, a forensic accountant will consider the conduct complained of and assess their impact on the company’s value.

3. Value the business

Forensic Accountants prepare a detailed CPR-compliant valuation report, including considerations of the conduct complained of. Further consideration will be given as to the appropriate discount that should be applied to the minority shareholding, including whether, in their eyes, the company demonstrates many of the attributes of a quasi-partnership.

Other factors will also play a part in an appropriate discount, such as the spread of shares between the remaining shareholders, the shareholders' management power, and the shareholding the majority shareholder will have once the minority shareholding is purchased.

If you would like to discuss an unfair prejudice matter/S994 Petition, George Horley and Jeremy Rowe, directors of Pierce Forensic Limited, are experienced forensic accountants here to assist. Please contact on 01254 688 100.

Enjoyed this? Read more from Pierce CA Ltd

Latest news

1

Wain Homes agrees partnership to complete development site in Blackburn Wain Homes site

Wain Homes agrees partnership to complete development site in Blackburn

27 Jan 2025

2

Panthera celebrate 5th anniversary at clinical research clinic

Panthera celebrate 5th anniversary at clinical research clinic

27 Jan 2025

3

Barnfield Construction transitions to an Employee-Owned Business Staff Cheer Photo.jpg.jpg

Barnfield Construction transitions to an Employee-Owned Business

24 Jan 2025

4

Wallsauce looks to grow B2B customer base with increased trade focus Martin Emmott Rosebud and Andy Gerraty Wallsauce

Wallsauce looks to grow B2B customer base with increased trade focus

24 Jan 2025

5

CBP goes into administration Community and Business Partners in Blackburn with doors shut

CBP goes into administration

23 Jan 2025

Background image for hub sign up block

LBV Hub

Leverage Lancashire Business View platforms

Post your news
Post your events
Post your offers
Build your network
Improve your SEO
Gain coverage in the magazine
Sign-up
Events
The Lancashire Festival of Business
FOB 315
Exhibitions
30 Jan 2025

The Lancashire Festival of Business

Impact Conferencing, Burnley, BB12 6QP

09:30 - 16:00

Skills Bootcamp in Procurement - Cohort 3
Blue-Modern-Land-Travel-Youtube-Thumbnail-2-1024x576.png.png
LBV Hub Awards
14 Jan 2025 - 18 Mar 2025

Skills Bootcamp in Procurement - Cohort 3

Community & Business Partners CIC, Blackburn, BB2 3UA

09:30 - 13:00

The Marketing Meetup IRL: Lancashire
LBV Hub Event Image.png.png
LBV Hub Networking
30 Jan 2025 - 30 Jan 2025

The Marketing Meetup IRL: Lancashire

Strawberry Fields Digital Hub, Chorley, PR7 1PS

18:00 - 20:00

Police Apprenticeship event
Student Centre Autumn 2022.jpg.jpg
LBV Hub Social
12 Feb 2025 - 12 Jan 2025

Police Apprenticeship event

University of Central Lancashire, Foster Social Space , Preston , PR1 2HE

16:00 - 19:00

February Preston Tech Connection Meet-Up: Tech & Our Planet
PRESTON TECH CONNECTION jan.ai.png.png
LBV Hub Networking
12 Feb 2025 - 12 Feb 2025

February Preston Tech Connection Meet-Up: Tech & Our Planet

Society1 Coworking Space, Preston, PR1 3LT

18:00 - 19:30

The Business Network Central & East Lancashire
LBV Hub Networking
13 Feb 2025 - 13 Feb 2025

The Business Network Central & East Lancashire

Mytton Fold, Langho, BB6 8AB

11:30 - 14:15

Amber River True Bearing Quarterly Investment Seminar
LBV Hub Seminars
13 Feb 2025

Amber River True Bearing Quarterly Investment Seminar

Mercure Blackburn Dunkenhalgh Hotel & Spa, Blackburn Rd, Clayton-le-Moors, Blackburn, Lancashire, BB5 5JP

16:00 - 18:00

Sub36 Networking - Behind the beans
Sub36 Social1200Atkinsons New
Networking
14 Feb 2025

Sub36 Networking - Behind the beans

Atkinsons Speciality Coffee, Lancaster, LA1 1 EX

09:00 - 11:30

National Apprenticeship Week 2025 Celebration - Business Breakfast Showcase
Student Centre Autumn 2022.jpg.jpg
LBV Hub Networking
14 Feb 2025 - 14 Jan 2025

National Apprenticeship Week 2025 Celebration - Business Breakfast Showcase

Media Factory , Preston, PR1 2HE

08:00 - 10:00

CMI Level 5 Management and Leadership Course
UCLanAerialCampus.jpg.jpg
LBV Hub Seminars
21 Feb 2025 - 21 Feb 2026

CMI Level 5 Management and Leadership Course

Preston Campus, Preston , PR1 2HE

09:00 - 17:00

CMI Level 5 Project Management Course
UCLanAerialCampus.jpg.jpg
LBV Hub Seminars
21 Feb 2025 - 21 Feb 2026

CMI Level 5 Project Management Course

Preston Campus, Preston, PR1 2HE

08:00 - 17:00

Employment Law, Tax and Payroll Update - East Lancashire
Employment updates - LinkedIn East Lancs-01.png.png
LBV Hub Seminars
26 Feb 2025 - 26 Feb 2025

Employment Law, Tax and Payroll Update - East Lancashire

Accrington Stanley Football Club, Accrington, BB5 5BX

08:00 - 10:00

Advertise with us

Reaching 50,000 members, our print, digital and event platforms offer a fantastic way to raise your business profile and help you grow.

Find out more LBV120 Online Graphic 1
Subscribe now

Weekly news bulletin