Unfair Prejudice Petitions After THG v Zedra: Limitation Isn’t the End of the Story

The recent landmark Supreme Court decision in THG v Zedra Trust Company (Jersey) Ltd has provided long‑awaited clarification on the applicability of statutory limitation periods to unfair prejudice petitions brought under sections 994 and 996 of the Companies Act 2006.

Before reaching the Supreme Court, the Court of Appeal had dismissed Zedra’s claim on the basis that section 9 of the Limitation Act 1980 imposed a six‑year time bar on unfair prejudice complaints. The central issue on appeal, therefore, was whether petitions under section 994 of the Companies Act are subject to statutory limitation periods at all.

Under sections 994 and 996, minority shareholders are entitled to petition the court where a company’s affairs have been conducted in a manner that is unfairly prejudicial the minority shareholders’ interests. Common examples include:

• diversion of assets to entities in which majority shareholders hold personal interests
• excessive remuneration to directors or controlling shareholders
• manipulation of dividends
• improper or selective share dilution
  

When dealing with such petitions, the court’s primary role is to determine whether the conduct complained of constitutes unfair prejudice and, if so, to grant the relief it considers just and equitable.

The key question before the Supreme Court was whether the Limitation Act 1980 governs these petitions and, if so, what limitation period applies. The Court held in a 4-1 majority that the Limitation Act does not apply to unfair prejudice petitions under section 994. This reinforces the broad remedial discretion afforded by the statute to minority shareholders seeking relief.

However, this does not mean that claims can be brought without restraint. Petitioners cannot rely on the absence of a statutory limitation period to revive stale claims indefinitely. The Court emphasised that principles of equity, such as delay, acquiescence, or laches, remain highly relevant. Where a petitioner has delayed unreasonably, particularly where they knew or ought to have known of the alleged unfair prejudice, the court may decline to grant relief if it would be unjust to the respondents.

In summary, the decision confirms that section 994 petitions are not subject to a fixed statutory limitation period. However, delay remains a powerful discretionary factor, and the court will not permit shareholders to rely on historic grievances where it would be inequitable to grant relief.

At MSB, we are seeing a significant increase in petitions brought under section 994 of the Companies Act 2006 by minority shareholders. It is vital for businesses to address these petitions promptly and effectively to minimise disruption and maintain commercial certainty.

If your company is facing an unfair prejudice petition, our specialist team can provide clear, strategic advice to protect your position and help you move forward with confidence.