VB Football Assets v Blackpool Football Club & Ors

A member’s interests under section 994 of the Companies Act 2006 include equitable expectations arising from an informal understanding in a private company. Conduct may be unfairly prejudicial even where it is not unlawful, if it breaches an understanding which equity regards as binding in good faith.

Payments from a company to entities controlled by its majority shareholder may amount to disguised dividends where they do not benefit the company or are made on uncommercial terms. Excluding a minority shareholder from significant management decisions contrary to a quasi-partnership understanding may also constitute unfair prejudice.

Relief under section 996 is discretionary and must be proportionate. A buyout may be ordered where a bespoke governance remedy is impracticable.

VB Football Assets held 20% of Blackpool Football Club, while the remaining substantial shareholding was held by Segesta, controlled by Owen Oyston. The petitioner alleged that the parties had reached a non-contractual understanding that its loans would ultimately support parity of shareholding and that the club would meanwhile be operated as a quasi-partnership.

Following Blackpool FC’s promotion to the Premier League, substantial sums were transferred to companies associated with the Oyston family. The petitioner alleged that these payments were improper, that it was excluded from management, and that new articles of association were unfairly prejudicial.

The central issues were whether the conduct was unfairly prejudicial under sections 994 and 996 of the Companies Act 2006, and what relief was appropriate.

1. Petition well founded in part. VB Football Assets had standing as a member. The complained-of payments, exclusion from management and adoption of articles concerned the affairs of Blackpool FC.
2. The written agreements did not contain the whole understanding between the parties. The evidence established a non-contractual gentleman’s agreement: the loans were advanced in contemplation of eventual parity, and pending that event VB Football Assets was to have an equal voice in the operation and profits of the club. In a private company, such equitable considerations could inform unfairness even though the understanding was not legally enforceable as a contract (paras [57]-[94], [311]-[322]).
3. The movement of funds within a corporate group did not excuse the directors from considering Blackpool FC’s separate interests. Directors remained subject to duties under sections 171, 172, 174 and 175 of the Companies Act 2006 (paras [324]-[328]).
4. Payments totalling approximately £2.5 million, admitted not to benefit Blackpool FC, were disguised dividends to the Oyston side. They prejudiced the petitioner by diminishing the company’s value and were unfair because the majority shareholder was enriched while the petitioner and minor shareholders were excluded (paras [341]-[352]).
5. The £4.2 million Protoplan payment, the Travelodge refinancing payments, the Zabaxe payment and the £11 million payment were also disguised dividends or materially uncommercial transfers. They were made without the petitioner’s consent and were unfairly prejudicial (paras [356]-[374]). The failure to declare dividends was relevant because the majority had extracted value in substance as dividends while excluding other members (paras [375]-[379]).
6. The petitioner had a legitimate expectation of equal participation in governance. Its exclusion from significant decisions, especially decisions concerning the payments, was unfairly prejudicial (paras [380]-[387]). The adoption of the new articles, considered alone, was not unfairly prejudicial (paras [413]-[415]).
7. A buyout was proportionate and preferable to a court-imposed governance structure. The Respondents were ordered to purchase the petitioner’s entire interest, including the assigned South Stand interest, for £31.27 million, subject to final submissions and an appropriate order being drawn (paras [445], [455]-[457]).