Sarah Holden, a minority shareholder in a privately owned Manchester trading group, was faced with a proposed restructuring that threatened significant dilution of her shareholding and a reduction in governance and dividend rights; the dispute concerned UK company and business law.
What Happened
The majority shareholders proposed a new equity issue and revised governance arrangements to attract fresh investment and speed decision-making. Draft documents were circulated from the company’s advisers with an urgent deadline for consent.
Sarah’s holding was materially diluted by the draft allocation, voting thresholds were altered, and dividend expectations changed. Disclosure was limited to headline terms, valuation assumptions were opaque, and the company did not meaningfully consult minority investors before seeking consent.
Concerned about unfair treatment, Sarah instructed Aldwych Legal to review the proposals and to seek a fair outcome without immediately resorting to litigation.
Legal Issues
- Whether the majority’s conduct amounted to unfair prejudice under section 994 Companies Act 2006.
- Directors’ duties and potential breaches (Companies Act 2006 ss171–177) in approving the restructure.
- Adequacy of disclosure and the valuation methodology applied to the new share issue.
- Process for obtaining shareholder consent and compliance with pre-action protocols (CPR/Pre-Action Protocol for Commercial Claims).
- Available remedies: negotiated safeguards, anti-dilution protections, or unfair prejudice proceedings.
Our Approach
Aldwych Legal carried out a focused review of the articles of association, the shareholders’ agreement and relevant board minutes. We analysed the restructuring documents and the financial model to quantify the impact on Sarah’s economic and voting position.
We served targeted requests for further disclosure on valuation assumptions, investor terms and alternatives considered. Our pre-action correspondence explained the client’s concerns and set out potential legal routes, referencing the CPR and the Commercial Pre-Action Protocol.
After presenting our analysis to the majority’s advisers, we entered structured negotiations seeking revised allocation mechanics, express anti-dilution provisions and enhanced information rights rather than immediate court proceedings.
Outcome
The restructuring proceeded only after agreed amendments. Sarah received improved commercial terms: a revised share allocation that reflected a fairer valuation, contractual anti-dilution protections and formalised information and approval rights for certain future decisions.
The company and investors avoided formal litigation. The revised governance framework provided clearer decision-making protocols and better protection for minority interests, preserving long-term value for all shareholders.
Result / Why It Matters
This matter demonstrates how Aldwych Legal combines technical company law analysis with focused pre-action work and negotiation to protect minority investors from unfair prejudice while enabling commercial restructuring to proceed.
