This article reviews the need-to-know points of law and practice surrounding shareholder claims relating to M&A transactions in United Kingdom (England & Wales).
Material Adverse Effect clauses
The importance of a textual analysis of the contractual language in ascertaining the meaning and effect of Material Adverse Effect (MAE) clauses was emphasised in
WEX entered into a share purchase agreement with Travelport to acquire two companies that provided virtual credit and payment services to the travel payments market. Under the MAE clause, conditions resulting from a pandemic could only be taken into account if they had a disproportionate effect on the target companies as compared to other participants in the industries in which the target companies operated.
Travelport sought to avoid the transaction by invoking the MAE clause and argued that the relevant industry for comparison was the “travel payments industry”. The court disagreed, holding that the word “industry” suggested a broad pool of participants. It also found that the “travel payments industry” was not a term in established use, but rather referred to informally and
Section 346 of the Companies Act 2016 provides the courts with broad powers to grant remedies as they deem necessary to bring an end to the complaints raised in an oppression action. In
Lee Kai Wuen v Lee Yee Wuen,(1) the Federal Court refused leave to appeal the Court of Appeal s decision which had found that the courts powers in an oppression action are broad and unfettered. This includes the power to order restitution to a company, a remedy traditionally seen as belonging to companies.
Facts
The subject company had two shareholders. The plaintiff (the majority shareholder) filed an oppression action against the other shareholder and a third party (the oppressors), anchored on, among other things, an allegation of misappropriation of company funds. According to the plaintiff, upon the hospitalisation and eventual death of the previous majority shareholder, the oppressors had conspired to have the creditors pay them monies which were supposed to be paid to the company. The plai