Leaver provisions in articles or a shareholders' agreement fix the price of a departing member's shares by reference to the manner of departure. Good leaver status ordinarily produces fair value; bad leaver status the issue price. Holt v Faulks; Re LCM Wealth Management Ltd.
Partnership; expulsion; good faith. A power of expulsion conferred by a partnership deed cannot be exercised for an improper or collateral purpose, and the court will look behind the exercise of the power to the purpose for which it was in fact used. The origin of the principle that powers of expulsion are not to be used for unworthy purposes, applied by analogy to company leaver and compulsory transfer provisions in Re LCM Wealth Management Ltd. Nineteenth-century authority which remains the doctrinal source of the good faith limit on expropriatory machinery. [Summary not yet checked against the judgment.]
Transfer of shares; restriction imposed by articles; leaver provisions. The articles obliged a member to serve a transfer notice where he should cease to be employed for whatever reason. It was held that the obligation to serve the notice arose even though the dismissal was unlawful. The width of a trigger expressed to operate irrespective of the reason for cessation is not cut down by the fact that the cessation was itself wrongful. With Re A Company (No 004377 of 1986), the answer to any argument that a compulsory transfer clause is disapplied by a wrongful dismissal. [Summary not yet checked against the judgment.]
Unfair prejudice; remedy; bad leaver provisions and valuation at par. The Inner House held that it was open to a judge, having found unfair prejudice established, nonetheless to value the petitioner's shares by reference to the expropriatory bad leaver provisions in the articles, even though the respondents had not yet triggered them, where the petitioner had been found guilty of gross misconduct entitling them to do so. The fair price was accordingly the price those provisions would have produced, namely par value. The critical warning for any petitioner: establishing unfair prejudice does not guarantee a valuation which escapes the contractual machinery. [Summary not yet checked against the judgment.]
Unfair prejudice; leaver provisions; scope for departing from the contractual measure. Where the articles contained good leaver, intermediate leaver and very bad leaver provisions specifying what was to happen where a member ceased to be a director, it was held that there was no room to apply the approach in Re Lloyds Autobody Ringway Ltd. Where the parties have stipulated the consequences of cessation of office, those stipulations govern. To be read with Gray v Braid Group (Holdings) Ltd on the constraint the contract imposes on the s.996 discretion. [Summary not yet checked against the judgment.]
Cites
References found in the judgments’ text, with the number of paragraphs in which each case is mentioned. Not a classification: how a case was treated is recorded under Later history.