Night club director ordered to pay £200k for company law breach

A director who had conducted the affairs of a night club in a way that had unfairly prejudiced a minority shareholder has been ordered to make an interim payment to her of £200,000.

The figure could be much higher once a further hearing takes place.

A judge had found that the company’s affairs had been conducted by the director in a manner that was unfairly prejudicial to a shareholder with a 25% holding.

The director’s conduct included the financial mismanagement of the company and its subsidiaries through the sale of a Soho club to himself at an undervalue and through his personally taking an opportunity to acquire another London club, in Euston, when that opportunity should have been made available to the company.

The judge ordered that the director purchase the shareholder’s stake in the company based on a valuation to be determined at further hearing.

The shareholder then requested that an interim payment of £500,000 be made to her.

The High Court held that it was desirable to make an order in the interests of justice and proportionality as the shareholder had been frozen out of receiving a return on her investment for a long period, and there were concerns that the director might dissipate his assets following various transactions he had arranged which had allowed charges to be taken over company assets.

It was possible that the director would have difficulty meeting a substantial final judgment if made.

The court could not order an interim payment of more than a reasonable proportion of the likely amount of the final judgment. There was some evidence suggesting that there was £800,000 available to the company.

On that basis, the court ordered an interim payment of £200,000.

Please contact Sarah Liddiard if you would like more information about the issues raised in this article or any aspect of company law.