The Next Alexa? Surfing the IP Challenges for Artificial Intelligence
13 September 2018
Very few of our cases end up in court as we find solutions and settle. We do not publish the names of the cases settled as discretion is something our clients can rely upon. However, in finding the solutions we work around the latest case law authority as that will be persuasive.
To provide a guide on how cases are being determined in court we have set out below some recent cases we have settled and recent leading decisions.
We recently acted for a minority shareholder in a business. He was a founder of the business, with several others. Recently he had been side lined and it came to a head when he was called in by the managing director and told he was to be made redundant. He was made a low offer for his shares.
We argued that as a founder and quasi-partner, he was entitled to work in the business and they were not allowed to push him out. We obtained an independent valuation of his shares, showing that they were worth substantially more than he had been offered. The other shareholders were not willing to negotiate. We therefore fully prepared court proceedings ready for issue and sent them to the other share holders with a final request to mediate the dispute. In the face of this, the other shareholders agreed to a mediation. This was successful and we agreed a negotiated settlement which our client was happy with.
We acted for one of two shareholders who had a minority stake in the company she had built up with the other shareholder over many years. After a dispute between the two, she was dismissed by the other shareholder. Attempts ate negotiation to agree a suitable valuation for our client’s shares failed and we issued High Court proceedings based on unfair prejudice as a shareholder. The other shareholder remained reluctant to settle and we continued to prepare for trial. Just a few weeks before trial, the other shareholder agreed to mediate. The mediation day – and much of the night – was successful and our client achieved a good price for his shares.
This case is authority for the fact that a shareholder can be forced to purchase the other shareholder’s shares in a 50:50 deadlock situation. It shows that the court has a very wide discretion in determining the value of the shares.
The shareholders who were also directors had fallen out. One director shareholder was cut off the computer system for several years before the court heard the case but he did continue to receive a salary. That director claimed that the company was being conducted in a way which was unfairly prejudicial to its shareholders. The parties could not reach agreement so there was an application made to court to resolve the shareholder dispute.
The court made a number of comments which can be helpful in resolving shareholder deadlocks.
The court held that the framework of the Companies Act conferred a very wide discretion on the court to do what was considered fair and equitable in all the circumstances of the case. The objective of the court was to put right the unfair prejudice which the shareholder had suffered. The Court was not rigidly restricted to making an order for a purchase at a market price to be arrived at only by ordinary valuation principles.
This case is authority for the fact that the valuation is performed on a whole company basis rather than the price per share which might be achieved for a minority shareholding if a discount for lack of control was factored in.
The company was owned by eight shareholders, all of whom were involved in the management of the companies. Control of the companies was finely balanced. The articles restricted the right of shareholders to sell their shares and granted pre-emption rights to other shareholders at a “prescribed price” which, in default of agreement, would be determined by independent accountants on a going concern basis. A dispute arose concerning the valuation. The company issued proceedings seeking determination on the correct basis of valuation.