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judge upholds unfair prejudice claim against Blackpool Football Club following gentleman's agreement

15 November 2017

In the case of VB Football Assets v (1) Blackpool Football Club (Properties) Ltd (2) Owen Oyston (3) Karl Oyston (4) Blackpool Football Club Ltd [2017] EWHC 2767 (Ch) the Court held that a ‘gentleman’s agreement’ existed between VB and Owen Oyston where VB would acquire a parity shareholding with the first respondent in the Club and have a joint say in the management following a subscription agreement and two loan agreements.

As a result, the High Court concluded that VB was entitled to petition as a minority shareholder in Blackpool F.C. under s.994 of the Companies Act 2006 for an order that the company’s affairs had been conducted in a manner that was unfairly prejudicial to the interests of members.

The Judge considered that the respondents completely failed to separate out transactions that were in the best interests of Blackpool F.C. from those in the interests of the wider Oyston Group. The petition was then granted by the Court on the basis that improper payments had been made to the majority shareholders which could have been paid out as dividends. In addition, VB was entitled to be treated as an equal partner in the governance of the club by virtue of the ‘gentleman’s agreement’. The appropriate relief granted was for the respondents to be ordered to buyout VB’s entire interest in the club for £31.27 million.

This case is a prime example of where oral contracts (this one being concluded in a pub) have been upheld and have resulted in huge consequences for all parties. The case also highlights the importance of corporate responsibility and how unfair prejudice actions can be extremely costly to shareholders where there is evidence of, amongst others, breaches of fiduciary duty and/or mismanagement.

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