Mantir Singh Sahota v Albinder Singh Sahota & Ors

The petitioner brought a Section 994 Companies Act 2006 petition alleging unfairly prejudicial conduct in a family quasi-partnership company. The court held that the Company was carried on as a quasi-partnership and examined allegations including withholding of financial information (invoking directors' rights under Section 388), exclusion from management, mismanagement (including the KTS payments issue) and alleged misappropriation of company funds used in rebuilding a director's house.

The judge found that the First Respondent (Jitha) had deliberately prevented the petitioner from obtaining financial information after 26 January 2020 and had caused Company funds to be used to purchase materials incorporated into his house; the value of those materials was assessed at £117,404. The court did not accept the petitioner’s case that the KTS payments established a deliberate misappropriation (fraud A), concluding instead that the accounting evidence supported payment for temporary labour with associated VAT exposure (fraud B scenario) but not that the petitioner alone had been unaware or that the Respondents had concealed everything. Experts agreed that certain filed accounts did not bear the petitioner’s normal signature.

On remedy the court granted the petitioner relief under s.994 and ordered that the responsible respondent (the First Respondent) purchase the petitioner’s shares. The valuation date was fixed at 29 February 2024. The Company was valued at £28,995,400; the petitioner’s shareholding was valued at £5,575,815. No minority discount was applied.

The petitioner, the eldest of five brothers who had carried on an equal-share family business as a quasi-partnership, presented a petition under Section 994 of the Companies Act 2006 alleging unfair prejudice in relation to the conduct of Corrugated Box Supplies Limited. The pleaded complaints included withholding of financial information, exclusion from management, mismanagement and misappropriation (including payments to an entity referred to as KTS and alleged use of company funds in building 23 Gorway Road), and alleged forgery of the petitioner’s signature on a number of filed accounts.

Nature of the application: A First Instance unfair prejudice petition under s.994 CA 2006 seeking, among other things, a buy‑out of the petitioner’s shares at court‑fixed valuation and without a minority discount.

Key issues the court framed:

• whether financial information and company records had been wrongly withheld from the petitioner and by whom;
• whether the petitioner had been improperly excluded from management;
• whether there had been mismanagement or misappropriation (including the KTS payments and the Gorway Road matter);
• whether the petitioner’s own conduct precluded relief; and
• what remedy was appropriate, and if a buy‑out, the valuation date, valuation and whether a minority discount applied.

Evidence and findings (concise): The judge accepted that the Company was a quasi‑partnership and that the First Respondent acted as de facto managing director. On credibility the court found significant shortcomings in the petitioner’s evidence on a number of factual points but accepted expert agreement that several filed accounts did not bear the petitioner’s normal signature.

The court concluded that, from 26 January 2020, the First Respondent deliberately restricted the petitioner’s access to financial information (contrary to the petitioner’s statutory/directorial entitlements), which was unfair in the context of the family quasi‑partnership. On the Gorway Road issue the court accepted expert survey evidence that specific materials purchased by the Company had been incorporated into the First Respondent’s house and, applying a broad‑axe assessment to the Company’s building ledger, assessed the Company money used for the house at £117,404. On the KTS payments the court accepted that invoices and cash payments had been made and that VAT had been reclaimed, but was not persuaded that the evidence established the particular fraudulent scenario alleged by the petitioner; expert forensic accountants reached a joint analysis but could not determine the identity of cash recipients from the records.

Remedy and valuation approach: The court exercised its wide discretion under s.994 to order a purchase of the petitioner’s shares by the responsible respondent. The judge and experts used a capitalised‑earnings approach (agreeing maintainable EBITDA and surplus assets), fixed the valuation date at 29 February 2024 and, preferring the seller’s expert on multiples, fixed an EBITDA multiple of 6.6. The Company’s enterprise value plus surplus assets was calculated at £28,995,400 and the petitioner’s 19.23% holding at £5,575,815. The court declined to apply a minority discount, explaining that the petitioner should not be penalised given the nature and cause of the unfair prejudice.

The petition under Section 994 Companies Act 2006 is allowed. The court found that the affairs of the company had been conducted in a manner unfairly prejudicial to the petitioner by the First Respondent (notably withholding requested financial information and causing company funds to pay for materials used in the First Respondent’s house). The appropriate remedy is an order that the First Respondent purchase the petitioner’s shares. The valuation date is 29 February 2024; the Company is valued at £28,995,400 and the petitioner’s 19.23% holding at £5,575,815; no minority discount should be applied.