In this Blog, our shareholder disputes expert, Andrew Carter, considers how minority shareholders can use unfair prejudice petitions to protect their position.
Introduction
An unfair prejudice petition is one of the most important protections available to minority shareholders in private companies. It allows a shareholder to ask the court to intervene where the company’s affairs are being conducted in a way that is unfairly prejudicial to their interests. In 2026, these petitions remain a powerful remedy, but they are also costly, time consuming, and rarely straightforward. Understanding when litigation is the right choice, and when out-of-court resolution may achieve a better outcome, is critical.
At a glance
Unfair prejudice petitions are designed to protect minority shareholders from unfair conduct, not to punish directors. The court’s focus is on achieving fairness and providing a remedy, usually through a share buy out. Early advice often opens the door to resolution without full litigation.
What is an unfair prejudice petition and who can bring one?
An unfair prejudice petition is brought under section 994 of the Companies Act 2006. It allows a member of a company to apply to the court where the company’s affairs are being conducted in a manner that is unfairly prejudicial to their interests.
Only shareholders can bring a petition.
- This normally involves being on the shareholder register.
- The court will not entertain complaints from directors, employees, or creditors unless they also hold shares.
- The petitioner must show both prejudice and unfairness.
- Conduct that disadvantages a shareholder is not enough on its own, if it is justified or consistent with agreed arrangements.
In practice, unfair prejudice petitions most often arise in small or medium sized private companies, particularly where there is a history of shared management or informal understandings that later break down.
Always remember – An unfair prejudice petition is available only to shareholders and requires proof of both unfairness and prejudice.
What behaviour counts as unfair prejudice in practice?
The court looks at substance rather than form. Common examples of unfair prejudice include
- exclusion from management where there was a legitimate expectation of involvement,
- diversion of business or opportunities to another entity,
- misuse of company funds, and
- excessive remuneration paid to majority shareholders or directors without justification.
Failure to declare dividends, dilution of shareholdings, or manipulation of company records can also amount to unfair prejudice, depending on the context. The court will consider the history of the parties’ relationship, the company’s constitution, and any shareholders’ agreements.
Our team of shareholder experts covers the whole range of behaviours. For example, we regularly advise clients on Non payment of dividends and unfair payment practices – a common issue with minority shareholders.
Importantly, the test is objective fairness. Conduct that may technically comply with company law can still be unfair if it breaches the understanding on which the shareholders agreed to participate in the business.
Key Takeaway: Unfair prejudice focuses on fairness on the facts, not just legal technicalities.
What remedies can the court order in an unfair prejudice claim?
The court has wide discretion when granting relief. The most common remedy is an order requiring one party to buy the other’s shares at a fair value – a share buy out This is intended to bring the relationship to an end rather than force the parties to continue together, enabling a clean break.
Valuation disputes are often central. Issues such as minority discounts, valuation date, and treatment of misconduct can significantly affect outcome. Winding up the company is technically available but is rarely ordered where a buy out is possible.
The court’s approach is remedial rather than punitive. The aim is to address unfairness and provide a practical solution, not to punish wrongdoing.
Key Takeaway: The usual outcome is a share buy out, not damages or company closure. Our expert team can help with business exit, share sales and valuation.
Is litigation always the best option for minority shareholders?
Litigation is not always the best route. Unfair prejudice proceedings are fact heavy, expensive, and emotionally draining. They can take many months, or longer, to reach trial and often damage the business irreparably along the way. Given how much each case can turn on its facts, it is also inherently high-risk.
Alternative dispute resolution plays an increasingly important role. Mediation, early neutral evaluation, and structured negotiations can often achieve a buy out or exit on acceptable terms without the cost and risk of court proceedings. Furthermore, it provides a remedy while keeping company affairs confidential. Courts now expect parties to consider ADR seriously, and may go as far as to order parties to attempt ADR.
That said, litigation can be necessary where there is entrenched misconduct, refusal to engage, or a need for court-orderedremedies. The decision requires careful assessment of leverage, cost, and objectives.
Litigation is effective but rarely the quickest or cheapest solution. Our team can help you resolve the situation without litigation.
When should minority shareholders take legal advice?
Bluntly – yes. It can save you enormous cost, time and stress in the future.
Timing is always critical. Early advice can shape strategy, preserve evidence, and improve negotiating position. Once positions harden and correspondence becomes adversarial, options narrow and costs rise.
Warning signs include exclusion from decision making, unexplained changes to remuneration, lack of transparency in company finances, or sudden changes to share structure. Addressing these issues early may avoid the need for formal proceedings.
Francis Wilks & Jones regularly advises minority shareholders on unfair prejudice claims, negotiated exits, and alternative dispute resolution across England and Wales.
Our shareholder disputes team at FWJ includes
Andrew Carter (Partner)
Andrew Carter is a commercial litigation partner with extensive experience resolving shareholder and partnership disputes. He acts for business owners, directors and investors in complex conflicts over control and value. Clients trust his calm, strategic approach and focus on achieving practical, commercial outcomes. His 20+ years helping individuals in this difficult area of the law is invaluable for clients
Gemma Newing (Senior Associate)
Gemma Newing is a commercial litigation solicitor with strong experience in contractual and company disputes. She acts for businesses and shareholders in complex claims requiring clear strategy and efficient resolution. Clients value her focus, responsiveness and commitment to achieving practical results.
Anna Beetson (Solicitor)
Anna Beetson advises SMEs, directors and shareholders on commercial and company disputes, with a focus on efficient and practical resolution. She combines strong technical knowledge with a clear, client-focused approach. Her work covers contractual claims, shareholder disagreements and boardroom issues.
Athena Kam (Paralegal; Unregistered Barrister)
Athena Kam supports clients across commercial litigation, director disqualification and debt recovery matters. Drawing on her background as an unregistered barrister, she brings analytical precision and attention to detail to every case. She assists in preparing evidence, drafting submissions and managing proceedings efficiently.
Supportive and friendly with partner-led involvement, I would recommend Francis Wilks & Jones to anyone facing a similar situation.
A shareholder who turned to us after discovering that his co-shareholder was profiting well from their business while he was being paid a pittance. We helped him find a way out of the business by selling his shares
