The husband and wife were directors and shareholders of a company (‘C’). The husband was adjudged bankrupt in June 2014; the petitioners were appointed as his trustees in bankruptcy. Among the assets vested in the trustees under s 306 of the Insolvency Act 1986 (IA 1986), was the husband’s shareholding in C. However, the trustees were not registered as members of C until March 2015.
In June 2015, the trustees presented a petition under s 994 of the Companies Act 2006, alleging that the wife had conducted C’s affairs in a way which was unfairly prejudicial to the trustees’ interests as members. In particular, it was alleged that the husband continued to be involved in the management of the company despite the prohibition in s 11 of the Company Directors Disqualification Act 1986. In the alternative, the trustees sought just and equitable winding up.
Among the points raised in opposition to the petition, the wife argued that the trustees had no standing to present the petition because s 124(2)(b) of the IA 1986 prevents contributories from presenting a winding up petition unless the shares ‘have been… registered in his name, for at least six months'.
A shareholder’s trustees in bankruptcy do not need to be registered as members of a company in order to avail themselves of shareholder relief.
This is because:
- Section 250 of the IA 1986 provides that a person to whom shares are transferred by operation of law ‘is to be regarded as a member’ and that references to a member ‘are to be read accordingly’;
- The trustees were therefore regarded as members from the date that the shares vested in them by operation of law and s 124(2) had to be read accordingly. The court also held that unfair prejudice was not limited to economic matters and that, by permitting the husband to continue to be involved with the management of the company, was itself unfairly prejudicial.