The recent case of Gibbons V Monarch Investments and another 2023 JRC 024 evidences the difficulties that can occur where the directors and administration of a company fail to act in the interest of the company and the minority shareholders.
In cases where there is a breakdown in relations between the members of a company, difficulties in communication can occur and there can be a lack of consideration for what is the best interests of the company. For the shareholders or members of a company this can result in the need for legal advice and sometimes intervention.
The case is set out in more detail below and if you are experiencing such issues then please contact our commercial or litigation departments on 760760 or by email on commercial@lgl.je or litigation@lgl.je .
 ……………………………………………………………………………………………………………
Gibbons vs Monarch Investments Limited and another 2023 JRC 024
Application for a Just and Equitable winding up of a Company under Art 155 of the Companies (Jersey) Law 2002 in the absence of the Respondent.
The Representor holds a 35.5% equitable shareholding in the company, his brother, the Respondent, holds the other 64.5% equitable shareholding in the company. The company has one director namely the Respondent. The Respondent is also the company secretary. The Respondent has refused to allow the Representor to be appointed as a Director. The Respondent runs the company and conductes its affairs on his own.
The company has assets in real property, which are rented and shares in a South African listed company. The company also received £300,000.00 from the Remise de Biens of the Respondent by way of repayment of a registered loan.
The company failed to prepare or file accounts, failed to file and pay its taxes, failed to file company returns, failed to maintain or let part of its property, failed to pay its parish rates or insurance and is in breach of the Companies (Jersey) Law in that its sole director is also the secretary.
The Respondent had allegedly suffered physical and mental issues in recent years, and it is alleged has refused or neglected to deal with company affairs or to engage in the legal process to the detriment of the Representor and the company.
The court appointed an Amicus Curiae (Advocate Calder), who spoke to the Respondent, who did not attend the hearing and who informed her that he wished to have nothing to do with the proceedings. The Amicus Curiae was unable to receive instructions or put forward the Respondent’s case.
The court set out Article 155 and considered the recent cases on that Article including Representation of Abdallah (2021) JRC 249 where the court considered that: It is not possible exhaustively to define all the circumstances when it may be just and equitable to order the winding up of a company. The court has a wide discretion, and each case must be assessed on its own merits.
There is a considerable degree of overlap between the legal principles applicable to the court’s power to grant a winding up order on the just and equitable ground and the court’s power to order relief in respect of unfair prejudice. Most importantly a Plaintiff does not need to demonstrate an unfair prejudice to his interests as a member to persuade the court to make an order for a winding up on just and equitable grounds and conversely the fact that an unfair prejudice can be shown does not necessarily lead to the conclusion that it would be just and equitable to wind up the company.
In making its assessment the court can look behind the legal personality of the company at the nature of the relationship between parties. There are circumstances in which the conduct of the controlling shareholder or director involves no breach of law, but nonetheless leads to the conclusion that it would be just and equitable to wind up the company.
The court can make an order where there has been a justifiable loss of confidence and partiality. This might occur where the controlling party treats the company as his own or freezes out the minority shareholder or there is a loss of confidence in the impartiality or probity of the company’s management.
There is a general statement of principle that any shareholder in a company is entitled to expect that its affairs are managed with probity and in accordance with basic principle of fair dealing.
Whether any particular conduct constitutes a sufficient want of probity or lack of partiality will always be context specific. The court recognises that it should be extremely reluctant to wind up a solvent company, which should be a last resort.
The court has to answer three questions: –
Has the Representor lost confidence in the probity and impartiality of the Respondent in managing the affairs of the company?
Is that loss of confidence justified? And
Is it sufficient to warrant a just and equitable winding up of the company?
The court reluctantly determined each in favour of the Representor.
This is a summary of the decision of the court and must not be treated as legal advice. In all cases where legal advice is required this must be addressed to either our litigation or commercial department.