Konstantin Kamenetskiy & Ors v Vitali Zolotarev & Ors (Re Variti Management Services Limited)

An allotment of shares occurs when a person acquires an unconditional right to be entered in the company’s register of members. A later directors’ resolution dealing with consequential steps does not retrospectively impose conditions on an allotment already made. Members cannot themselves circulate a written resolution under the Companies Act 2006; a valid board decision to circulate it is required. A written resolution circulated by the company lapses after 28 days if not passed. Obiter observations suggesting that members may pre-agree written resolutions should be treated cautiously because pre-agreement is not contemplated by the Act and may undermine its safeguards.

The claim concerned the validity of share allotments, written resolutions purporting to appoint two additional directors, subsequent company filings, the company’s shareholdings and competing general meetings. The claimants maintained that the first claimant remained the company’s sole director and that the third and fourth defendants had never been validly appointed. The defendants challenged the allotment of shares to the fourth claimant and relied on the January 2021 resolutions, alleged prior practice and purported pre-approval of later resolutions.

The central issues were whether the allotments were valid, whether the written resolutions had been validly passed, and what legal consequences followed.

1. Share allotment. The Assignment Agreement was the contract of allotment. On its execution, the fourth claimant acquired an unconditional right to the shares. The allotment therefore occurred on 12 May 2020 under s558 of the Companies Act 2006. The later sole-director resolution of 18 May 2020 was consequential and could not introduce a new condition. The shares were also issued and entered in the register. No rectification application had been made under s125.
2. Written resolutions. The January resolutions were not validly passed. Members have no self-help power to circulate written resolutions. There must be a valid board decision for the company to circulate them. The remedy for members frustrated by the company’s failure to circulate a resolution is to require or convene a general meeting, or to proceed on a Duomatic basis.
3. Section 293(7). The provision protects the validity of a resolution already passed from failures to comply with the circulation requirements. It does not cure the absence of a valid circulation of a written resolution by the company or a failure to comply with s292(4).
4. February resolutions and pre-approval. The February resolutions were not signed by shareholders and automatically lapsed after 28 days under s291(1)(b). The obiter observations in Re Sprout concerning possible pre-agreement should be treated cautiously. Pre-agreement is not contemplated by the Act and would cut across the safeguards in s293. In any event, the evidence showed that the defendants believed the January resolutions had already taken effect.
5. Consequences and relief. The purported directors were never validly appointed and had no authority to act for the company. The first claimant remained sole director, validly made the January and April allotments, and validly called the 9 a.m. general meeting. The 10 a.m. meeting was invalidly called, and the attempted removal failed. The claimants were granted the declarations and orders under s1096(1) sought. Costs and consequential relief were reserved.

This was a first-instance claim in the High Court. The judgment records that proceedings were issued after unsuccessful attempts to resolve the dispute, followed by consent orders dated 3 February 2022 and 1 July 2022 giving directions for pleadings, evidence and trial.