- William Kanaan
Duty of Good Faith
The Chancery Court considered an action brought through a petition under section 994 of the Companies Act 2006 alleging that the conduct of the respondents (R) had resulted in unfair prejudice to the petitioner (P).
The court considered the terms of an obligation in a shareholders’ agreement (Agreement) between one of the respondents (a company - C) and its investors to “work together in good faith towards an Exit no later than 31 December” and to “give good faith consideration to any opportunities for an Exit”.
There was no exit and the company remained unsold.
P alleged that C, through its chairman of the board of directors (also a respondent), did not work in good faith and was in breach of the agreement.
The court held that there had been a breach of the agreement as the chairman of the board of directors of C did not conduct the process in accordance with the obligations under the Agreement. The court ordered C to buy out the P’s shares.