Jusan Technologies Limited v Uconinvest LLC

This first instance Part 8 claim concerned an application under section 125 of the Companies Act 2006 to rectify the register of members by removing the defendant, Uconinvest, on the basis that the company’s directors had no power to register it because the transferee had not become bound by the shareholders’ agreement as required by article 12(2) of the claimant’s articles. The court decided three primary issues: (i) article 12(2) required delivery of a deed of adherence that was legally effective (or otherwise the prior unanimous consent of the A Ordinary shareholders) before directors had power to register a transferee; (ii) the burden of proving any prior unanimous A Shareholder consent rested on the claimant company; and (iii) on the facts the court inferred that the relevant A shareholder, QAZ42, did not consent. However, the registration was part of a bipartite sale transaction between JTL and Uconinvest, and therefore Uconinvest was a person dealing with the company in good faith within s.40 of the Companies Act 2006, which deems directors’ powers free of limitations in favour of such persons. Applying s.40 and s.41, the court held that JTL could not rely against Uconinvest on the excessive exercise of the directors’ powers and dismissed the rectification claim.

The claimant, Jusan Technologies Limited (JTL), sought rectification of its register of members under section 125 of the Companies Act 2006 to remove Uconinvest, who had been registered on 7 March 2023 as the holder of 12,255,099 B Ordinary shares. The B shares had been sold by JTL to Uconinvest under a sale and purchase agreement dated 29 December 2022. JTL relied upon article 12(2) of its articles of association, which required a transferee to deliver a deed agreeing to be bound by any shareholders’ agreement or, alternatively, the prior consent of all A Ordinary shareholders, before the directors could register the transferee.

The Part 8 claim arose after earlier proceedings (including an unfair prejudice petition and an arbitration stay application) in which this court had held that Uconinvest was not bound by the shareholders’ agreement because a deed of adherence had not been validly brought into effect (QAZ42 had not executed). At a directions hearing the parties and the court agreed that the Part 8 claim would be tried on a limited factual basis: the text of article 12(2), the invalidity of the deeds of adherence, and whether not all A Ordinary shareholders had consented to registration. Disclosure was ordered in respect of the disputed consent issue.

The court framed three legal issues: (i) whether article 12(2) required the deed of adherence to be legally effective before registration; (ii) on whom the burden of proof lay as to whether all A Ordinary shareholders had given prior consent; and (iii) whether QAZ42 had in fact consented. The court held that article 12(2) required a deed that was legally effective (although effectiveness could be achieved by subsequent execution prior to registration), that the burden of proof lay on JTL as the claimant seeking rectification, and on the evidence and inference from documentary material that QAZ42 had not consented.

The court then considered whether JTL could rely on the directors’ excess of power to obtain rectification. Uconinvest relied on section 40 of the Companies Act 2006, which treats the directors’ power to bind the company as free of limitations in favour of a person dealing with the company in good faith. The court concluded that Uconinvest, at the time of the sale, was an outsider who became beneficially entitled to the shares under the bipartite SPA and that the registration was part of that single transaction. Therefore Uconinvest was a person dealing with JTL in good faith and s.40 applied, preventing JTL from relying against Uconinvest on the excessive exercise of directors’ powers. The Part 8 claim for rectification therefore failed and was dismissed.

The court also set out an alternative reasoning it would have followed if s.40 did not apply: the registration was capable of being set aside because it was in excess of directors’ powers, but discretionary factors (conduct, estoppel, warranties in the SPA and the parties’ dealings) nevertheless made it arguable that the court could refuse rectification. The claimant had not proved its case on the limited factual basis on which it pursued the claim.

This first instance claim is dismissed. The court held that article 12(2) required a deed of adherence to be legally effective before directors could validly register a transferee unless all A Ordinary shareholders had given prior consent; the claimant bore the burden of proving lack of such consent and established that QAZ42 did not consent. However, because the registration formed part of the bipartite sale transaction and Uconinvest dealt with JTL in good faith, section 40 of the Companies Act 2006 applied and precluded JTL from relying on the directors’ excessive exercise of power to obtain rectification. Accordingly the court dismissed the Part 8 claim for rectification.