Lord, “My statutes are in conflict with my shareholders’ agreement” | Allen & Overy LLP

The minority shareholders of Maven Wealth, Lord and Davies, sold their A and C shares to the majority shareholders while retaining their B shares. The articles of association and the shareholders’ agreement were concluded at the time of the sale. The minority shareholders were subsequently removed from their duties as directors due to alleged misconduct. This was a “transfer event” according to the articles. This meant that the remaining B shares had to be transferred at the wrong leaver price of “25% of fair value”.

The dispute revolved around whether the correct procedure the valuation was done under the shareholders’ agreement, as claimed by Lord and Davies, or under the articles.

The plaintiffs said the definition of “fair value” imported the procedure provided in the shareholders’ agreement. They also said that the entire provision of the pact meant that the articles of association and the shareholders ‘agreement should be read together, and there was an express provision that the shareholders’ agreement prevailed in the event of a conflict.

The defendants said it was enough to look at the articles and that the reference to the definition of “fair value” in the shareholders’ agreement was about formula and not procedure.

The court agreed with the defendants that the correct reading was that the definition was used to explain what “fair value” was and not how it was to be obtained. In short “The only basis on which one could find a real conflict between the provisions of the articles and [the shareholders’ agreement], rather than a fairly trivial mess, it is by approaching the exercise of construction in the spirit of literalism which has been rightly discouraged for many years.

Judgement: Lord vs. Maven Wealth

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