Schofield v Jones

Under section 306 of the Companies Act 2006, it is impracticable to hold a general meeting where a member can prevent a quorum by refusing to attend. The court may then order a meeting to proceed with a quorum of one. In exercising that discretion, considerable weight should be given to the majority shareholder’s statutory right to remove a director by ordinary resolution, particularly where no class rights are affected. Pending or threatened unfair-prejudice proceedings under section 994 are not an automatic bar. They are matters to be weighed with the other circumstances. Board deadlock is relevant but is not an essential precondition.

Peter David Schofield applied under section 306 of the Companies Act 2006 for an order permitting a general meeting of The Sky Wheels Group Limited to proceed with one member constituting a quorum. The meeting was intended to consider Christopher Stephen Jones’s removal as a director.

Jones, the minority member, refused to attend, making the meeting inquorate. He relied on threatened unfair-prejudice proceedings under section 994 and argued that the company could continue to operate without his participation. The issues were whether the statutory jurisdiction was engaged and whether the court should exercise its discretion to order the meeting.

1. The section 306 jurisdiction was engaged. The respondent had thwarted the meeting by refusing to attend or agree to its being held in his absence, making it impracticable to proceed under the articles and the Act.
2. The court exercised its discretion to order a meeting with a quorum of one. Section 168 reflects the statutory policy that shareholders may remove a director by ordinary resolution. That policy carried considerable weight where the majority shareholder’s will was frustrated and no class rights were involved.
3. Concurrent or threatened section 994 proceedings were not an absolute bar. They were factors to be weighed. The application was not tactical.
4. The court did not determine the competing allegations of wrongdoing. It considered the respondent’s continuing status as a de jure director, including his power to bind the company and the potential reputational risks, together with his lack of day-to-day involvement and apparent intention to seek only a fair-value purchase of his shares.
5. Board deadlock was relevant but not an essential precondition. The circumstances were distinguishable from Re Sticky Fingers Restaurant Ltd, where the respondent retained day-to-day control and a just and equitable winding-up order was sought as an alternative.
6. The order sought under section 306 was granted.