Director fails to get injunction that would disrupt company business

A businessman has failed to get an injunction that would have prevented his company filing accounts and holding board meetings. He also failed to establish that a board room colleague had not been validly appointed as a director.

The company involved, which provided finance to small businesses, had been acquired by Mr Katan and Mr Feroze, and a third director in 1997. It had an issued share capital of 10,000, of which 5,000 were held by Katan and 2,500 each by Feroze and the other director.

Feroze was company secretary and was registered as a director in 2016. None of the formalities required in respect of a directors’ or shareholders’ vote were observed for Katan or Feroze.

Since 2016, the relationship between the two men had deteriorated and in 2019, Katan presented a petition under the Companies Act 2006 s.994, which alleged that he had been excluded from the company.

In 2020 he was given notice of a board meeting for March 2020 to consider a share swap, timing of closure of the business and wind down. Feroze and the other director voted for the resolutions and Katan voted against.

Another board meeting took place in September 2020 to confirm that dividends under the share swap were interim dividends. Katan again voted against the resolution.

He submitted that no effective resolutions were passed at the meetings as Feroze had not been validly appointed as a director of the company so that there was no majority vote. He alleged that Feroze was not a director, which made board resolutions ineffective. He sought an injunction to prevent the company from filing the 2020 accounts or calling meetings.

Feroze contended that he was registered at Companies House as a director, had acted as a director of the company and had previously been acknowledged as a director by Katan.

The High Court rejected the applications.

It held that Katan had no real prospect of proving his claims because, on the evidence, he had by his conduct assented to or acquiesced in Feroze’s appointment as a director of the company.

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Katan v Feroze
Chancery Division
22 July 2021
Jeremy Cousins QC