No time limit on shareholders’ rights to petition for unfair prejudice

Section 994 of the Companies Act 2006 provides one of the most important protections available for shareholders - allowing a shareholder to apply to the court by petition for relief where “the company’s affairs are being or have been conducted in a manner that is unfairly prejudicial to the interests of members generally or of some part of its members (including at least himself),…”. These claims are often termed as “corporate divorce”.

The conduct complained of can be an act or an omission and can be “actual or proposed”, but it must relate to the affairs of the company in question. Common examples of such conduct include: the petitioner being removed from decision making, having been involved previously; a director(s) using company property or opportunities for personal benefit, or diverting business from the company to another entity; paying directors disproportionately high salaries or benefits at the expense of shareholder returns; issuing new shares deliberately to dilute a shareholder’s voting power or economic interest.

If the court agrees that there has been unfairly prejudicial conduct, it has a wide discretion (under section 996) to grant a remedy. The most common remedy sought is an order for the purchase of the shares of the petitioner by other members, or by the company itself, to achieve a clean break. The price at which the petitioner’s shares should be purchased is often the most contentious issue in a petition.

The long-held position has been that unfair prejudice petitions have not been subject to statutory limitation periods under the Limitation Act 1980 (the “1980 Act”), although there has been some uncertainty about this. A “limitation period” is the time within which a petitioner must initiate court proceedings, and for this type of claim that would start from the date of the unfairly prejudicial conduct complained of.

The case of THG Plc -v- Zedra Trust Company (Jersey) Limited [2026] has resolved the important matter of what limitation period applies to an unfair prejudice petition.

The unfair prejudice alleged
 

In 2019 Zedra (a minority shareholder) brought an unfair prejudice petition under section 994 against THG Plc and its former and current directors for having conducted the affairs of THG Plc in a manner alleged to be unfairly prejudicial to the interests of Zedra.

In 2022 Zedra sought permission from the court to amend its petition to include allegations that it had been unfairly prejudiced because it had been excluded by the company directors, acting in breach of their directors’ duties, from the allotment of bonus shares in July 2016, and claiming compensation as a result.

THG Plc opposed Zedra’s application for permission to amend on the basis that the bonus share issue had taken place more than 6 years prior to the amendment application, therefore, the claim for compensation was time-barred under section 9 of the 1980 Act.

High Court and Court of Appeal
 

In considering Zedra’s application, the High Court held that the 1980 Act does not have a limitation period that applies to petitions under section 994, therefore, the amendment was not time-barred.

THG Plc appealed to the Court of Appeal which held that:

• The right of a shareholder to petition for relief for unfair prejudice derives from statute (section 994 Companies Act 2006), therefore, is subject to a 12-year limitation period as “an action upon a specialty” under section 8 of the 1980 Act;
• However, where the only remedy sought is “to recover any sum recoverable by virtue of any enactment” the claim will fall under section 9 of the 1980 Act, and the applicable limitation period will be 6 years from the date of the unfairly prejudicial conduct complained of.

As the only remedy sought by Zedra was monetary compensation, the 6-year limitation period applied and the amendment was time-barred. Zedra appealed to the Supreme Court.

The Supreme Court’s determination
 

The Supreme Court had to consider two main issues. Firstly, whether a claim under section 994 is an “action upon a specialty”, which would mean a limitation period of 12 years would apply. Secondly, whether it is “an action to recover any sum recoverable by virtue of any enactment”, which would mean a 6-year limitation period would apply.

By majority judgment, the Supreme Court held that:

• An unfair prejudice petition is not an “action upon a specialty” under section 8 of the 1980 Act. An action under a specialty is essentially an action to enforce an obligation created by deed or statute, and section 994 does not create obligations but provides remedies. While there was disagreement as to whether this extends to non-monetary obligations, it was not necessary to determine that point for the purpose of the appeal;
• An unfair prejudice petition seeking monetary compensation is not an “action to recover any sum recoverable by virtue of any enactment” under section 9 of the 1980 Act;
• Section 996 of the Companies Act 2006, which gives the court a wide discretion to “make such order as it thinks fit for giving relief in respect of the matters complained of”, is incompatible with applying a limitation period;
• Therefore, no statutory limitation period applies to unfair prejudice petitions.

Note however that the Supreme Court made it clear that regardless of its decision on statutory limitation periods, when exercising its discretion, a court dealing with an application under section 994 may take into account any unjustified delay in bringing the petition.

About the authors

Fiona regularly advises directors, shareholders and companies involved in breach of duty disputes or unfair prejudice petitions. She also has extensive expertise in commercial disputes and civil fraud matters.

Charlotte is an Associate in the Dispute Resolution team. She has wide-ranging litigation experience, with a particular interest in civil fraud and commercial disputes.