Unfair prejudice petitions in the sheriff court

Section 994 of the Companies Act 2006 allows for actions to be taken by a shareholder where unfairly prejudicial conduct of the company’s affairs is alleged. Section 996 provides for the remedies which may be obtained from the court. Although the Act refers to a petition being presented, such actions can be brought in the sheriff court by way of summary application such as occurred in Wishart, Petitioner [2016] SC FOR 29.

In this action the “innovative and creative” remedy sought was a payment by a wife against her divorced spouse and fellow shareholder in a company formerly operated by them both during their marriage.

The procedural points to note were: (1) it was competent to amend the application before the court, as the summary procedure is a highly flexible one; (2) s 996 in principle permits an order for the payment of money; (3) s 15A of the Debtors (Scotland) Act 1987 permits interim diligence as part of such an application, so long as there is a crave for the payment of money; (4) whilst an unauthorised loan to the director husband did not constitute unfair prejudice, a prima facie case was made out in relation to large sums of money allegedly paid out to the husband where no corresponding dividend had been paid to the wife. In those circumstances, it was arguable, just, that the corporate veil could be lifted and for decree for the unpaid share to be made against the husband personally.

The full decision can be read here.