COURT HAS JURISDICTION TO ORDER SHAREHOLDER TO PAY SUM TO PRESERVE COMPANY AS A GOING CONCERN

Adam Ferris

In UTB, LLC v Sheffield United Ltd 2018, the High Court considered whether it was able to grant an interim injunction to compel one shareholder (A) to pay a sum of money to maintain, as a going concern, the company in which both it and another party (B) had substantial shareholdings.

The two 50% shareholders of the holding company (HoldCo) of Sheffield United Football Club (SUFC) were in dispute and were parties to litigation that was approaching trial. B had growing concerns over SUFC’s solvency and sought an injunction to require A to loan £1.25 million, matched by B, to HoldCo in order to preserve the business until trial. A had previously offered to gift the sum if B matched the gift, however B refused to agree to this proposal due to his concern that he would lose the sum at trial.

The court considered whether it had jurisdiction to grant the interim injunction and, if so, on what basis it could compel B to loan money to maintain SUFC. Fancourt J rejected A’s argument that an interim order for the preservation of property could not be an order to spend money and determined that the court did indeed have jurisdiction to make the order requested under either CPR 25.1(1) or CPR 25.1(3).

However, applying American Cyanamid principles the judge concluded that the interim injunction requested in this instance was unjustifiable as B had failed to establish an immediate and pressing need for the additional funds.

Accordingly, the injunction was not granted.

Post By Adam Ferris (3 Posts)

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