Schofield v Jones

The court granted an order under section 306 of the Companies Act 2006 to call, hold and conduct a general meeting of The Sky Wheels Group Limited with directions that one member present will constitute a quorum. The jurisdictional threshold in s306 was satisfied because it was impracticable to convene a quorate meeting: the minority shareholder and director had frustrated meetings by refusing to attend. The judge exercised his discretion in favour of relief, giving significant weight to the statutory policy reflected in section 168 that shareholders should be able to remove a director by ordinary resolution and treating the existence of threatened or draft section 994 proceedings as not an absolute bar to s306 relief. The court did not decide the substantive allegations of wrongdoing, which were left to other proceedings.

This was an application by a director and member (the applicant) of The Sky Wheels Group Limited for an order under section 306 Companies Act 2006 that a general meeting be called and conducted so that one member present will constitute a quorum. The purpose of the proposed meeting was to consider a resolution to remove the respondent, who is both a director and the minority shareholder, for alleged breaches of statutory and fiduciary duties. The respondent had in practice ceased attendance at company premises, been removed from the bank mandate and had not participated in general meetings; as a result a meeting convened to consider removal was inquorate.

The court framed the issues as:

• whether it was "impracticable" to call or conduct the meeting so as to engage jurisdiction under s306;
• whether, if jurisdiction existed, the court should in its discretion order a meeting and direct that one member present is a quorum given the presence of threatened unfair prejudice (section 994) proceedings and competing submissions on fairness.

On jurisdiction the judge was satisfied that the respondent had and could continue to frustrate meetings by non-attendance and refusal to permit the meeting to proceed in his absence, so the s306 threshold was met. On discretion the judge considered leading authorities (including Union Music Ltd v Watson, Smith v Butler and later cases) and concluded that the statutory policy in section 168 favouring removal of directors by ordinary resolution weighed strongly in favour of relief. The existence of threatened section 994 proceedings was held not to be a bar; it was a relevant factor but insufficient to outweigh the majority shareholder's statutory right. The judge noted the factual background of serious allegations against the respondent, that three of four directors had lost confidence in him and that the court was not deciding the substance of those allegations on this application. The judge therefore granted the s306 order directing a meeting to be called with a quorum of one.

The application is allowed. The court exercised its statutory power under section 306 Companies Act 2006, finding it impracticable to call or conduct a general meeting in accordance with the articles because the minority shareholder/director was thwarting meetings by non-attendance, and in the exercise of its discretion ordered a meeting to be called and conducted with one member present deemed to constitute a quorum. The court gave weight to the statutory policy in section 168 that shareholders should be able to remove a director by ordinary resolution and held that threatened section 994 proceedings did not bar the grant of relief.