The recently reported case of VB Football Assets against Owen Oyston and Karl Oyston and others serves as a very useful reminder of what sorts of behaviours can constitute unfair prejudicial conduct under the Companies Act 2006 and what the court can do if such conduct is found.
The VB Football Assets case revolved around the ownership of Blackpool Football Club and was a dispute principally between Valeri Belokon, through his company VB Football Assets, which owned 20 per cent of the club, and various respondents including majority shareholder Owen Oyston and his son Karl Oyston, Blackpool’s chairman.
Blackpool FC and Unfair Prejudice
Unfair prejudice is a claim that can be brought by aggrieved shareholders if they believe their company’s affairs have been conducted in a manner that is unfair and causes them prejudice or harm.
Examples include exclusion from management, abuse of power, breaches of the company’s Articles of Association, excessive financial benefits, or the diversion of business to another company that the majority shareholder has an interest in.
The VB Football Assets case would appear to have been a bitterly fought case involving among other things, allegations of failure to pay dividends, disguised dividends, payments to third parties and exclusion from management. The court’s judgment runs to 163 pages.
The court found that VB Football Assets had been unfairly prejudiced and ordered a clean break between the shareholders and that as part of that, Owen and Karl Oyston pay approximately £31 million to VB Football Assets.
In ordering the payment, the court had to consider the value of the company which owned Blackpool FC. This was a complicated exercise because, despite Blackpool FC being in League One at the time of the court’s judgement, the majority of the matters considered took place when the club was in the Premier League in 2010-2011 during which time it received revenues from the Premier League alone of £42.99 million and, following its relegation from the Premier League, ‘parachute payments’ totalling £80 million.
Given that it found unfair prejudice, the court based its award on the payments that it found were made as disguised dividends (£26.77 million) and the value that VB Football Assets paid for its shares in Blackpool FC (£4.5m).
This case is interesting in that it shows that when it comes to the award, the court can and will look at the particular acts or omissions, when they took place and the sums involved in the acts complained of, rather than simply valuing the company at the date of the petition or the court order, even if this gives an outcome which involves sums much greater than the current value of the company itself.
There might be an appeal so watch this space.