Shareholder Disputes in the Jersey Courts

Unfair Prejudice

The statutory test
The unfair prejudice action is most commonly used in circumstances where the dispute concerns alleged mismanagement of a company and/or its affairs, or unfair treatment of a shareholder. Unfair prejudice actions can be based on a wide range of issues, but the most frequently seen allegations tend to centre on exclusion from management, withholding of company information and dilution of shareholdings or dividend entitlements.

Article 141 of the Companies Law allows a member of a company to apply to the Royal Court for relief where the company’s affairs are being, or have been, conducted in a manner that is unfairly prejudicial to the interests of members (shareholders) generally, or to some members (including the applicant). The proper plaintiff will be the member whose name appears on the register. In cases where this is a trust company or fiduciary services provider acting as nominee for the ultimate beneficial owner, cooperation between the trustee and beneficiary will be needed to bring the claim (though there are avenues open to beneficiaries to deal with an uncooperative trustee, should that arise).

The leading authority is Financial Technology Ventures II (Q) LP v ETFS Capital Ltd [2021] JRC 025. Drawing on the English framework set out in Re Coroin (No 2) [2012] EWHC 2343 (Ch), the Royal Court identified three requirements:

1. the matters complained of must constitute conduct of the company’s affairs (or an actual or proposed actor omission of the company);
2. they must cause prejudice to the applicant’s interests as a member of the company; and
3. the prejudice must be unfair.

On appeal, the Court of Appeal ([2021] JCA 176) noted that these cases are inherently fact-specific. The articles of association and any shareholders’ agreement/investment agreement will often be the starting point for the analysis of whether the alleged conduct is unfair.

Allegations of a “legitimate expectation” are often advanced by shareholders in unfair prejudice actions, though the Jersey courts have been clear that while such allegations can form part of a claim, any such expectation is not a substitute for the statutory test.

Remedies and valuation
Much like the corresponding provisions in the English Companies Act, Article 143 of the Companies Law gives the Court broad discretion as to remedies. The Court may make such order as it thinks fit, including a buy-out order, regulation of the company’s affairs in the future, and authorisation of proceedings in the name of the company.

On valuation, the Court of Appeal in ETFS emphasized that the principles are flexible and, again, their application will be fact-specific. This is particularly so in relation to minority discounts or pro rata valuation. Quasi-partnership features, exclusion from management and ‘squeeze-out’ conduct by the majority shareholder(s) can all be relevant. In practice, the valuation date for shares is often taken as the date of trial. However, this can become a key point of dispute where the valuation of the shares in the company has changed significantly since the initial events complained of in the claim (especially where such valuation change is alleged to have been caused by the unfairly prejudicial conduct complained of).

Limitation
A recent English development which should be noted is THG plc v Zedra Trust Company (Jersey) Ltd [2026] UKSC 6, in relation to limitation (or ‘prescription’ as it is referred to in Jersey law). The Supreme Court held that no limitation period applies to unfair prejudice claims under section 994 of the Companies Act 2006, including those seeking monetary relief. There is no specific Jersey authority on this point following the Supreme Court’s decision, and it should be noted that the Jersey law on prescription differs from the English. It remains to be seen how Zedra may influence the Jersey courts.

Derivative Actions

Jersey’s customary law route
Unlike England and Wales, where company law derivative claims are governed by Part 11 of the Companies Act 2006, Jersey retains a customary law derivative action rooted in the rule in Foss v Harbottle. This is the rule that, when a wrong is done to a company, the proper plaintiff in a claim arising from that wrong is the company itself, rather than its shareholders. A shareholder may bring a derivative claim on behalf of the company where a recognized exception to the rule in Foss v Harbottle applies – typically ‘fraud on the minority’ or in relation to actions which are alleged to be ultra vires or otherwise unlawful. The claim must be brought bona fide for the company’s benefit and in circumstances where no alternative remedy is available.

Procedure and permission
The procedural framework for bringing a derivative action is set out in Rule 6/39 of the Royal Court Rules 2004. This procedure is materially different from the English Civil Procedure Rules.

A derivative claim must be commenced by Order of Justice (a fully pleaded statement of claim). The company must be joined, and the plaintiff must seek leave from the Inferior Number (a judge sitting with two jurats, who are lay members of the Jersey judiciary) to continue the action. The application for leave must be supported by an affidavit. The Court may grant an indemnity from company assets for costs.

Choosing the right claim
The Royal Court has strictly applied the requirement that no alternative remedy be available. In Robertson v Slous [2000] JLR 246, the Court struck out a derivative claim where the personal and derivative claims of the plaintiff were inextricably connected, and alternative remedies were available under Articles 141 to 143 of the Companies Law (i.e. in unfair prejudice) and just and equitable winding up.

The question will always depend on the facts of the matter, and advice should be taken to avoid a claim being liable to strike out due to being pleaded incorrectly. Generally where the key complaint is about how the majority has managed the company, unfair prejudice will be the primary avenue. A derivative claim is usually more suited to cases where wrongs have been committed against the company itself.

Just and Equitable Winding Up

When the Court may intervene
Article 155 of the Companies Law permits the Royal Court to wind up a company where it considers it just and equitable to do so. The Court has approached the term ‘just and equitable’ with flexibility, rather than ascribing a fixed definition.

Circumstances in which the courts have ordered a winding up on just and equitable grounds include: unresolvable deadlock between shareholders as to the management of the company; loss of substratum (the fundamental purpose for which the company existed); loss of confidence in management arising from dishonesty or serious mismanagement; serious breaches of the articles of association or shareholders’ agreements/investment agreements; and a breakdown of trust and confidence in companies which operate as quasi-partnerships. The above is not an exhaustive list – the Court’s discretion is broad, and many applications for just and equitable winding up involve a number of the above factors.

Winding up as a last resort
As in England, winding up is usually the last resort because it results in the company being liquidated, with creditors’ claims being preferred over those of ordinary shareholders. In Leveraged Income Fund Limited, the Court ordered winding up where the company had no assets nor any prospect of ever having any assets again, could not pay for routine expenses and was unable to recommence its activities; its substratum was “undoubtedly gone”.

An application for winding up on just and equitable grounds can be a lever to encourage settlement of an unfair prejudice claim. In ETFS, the plaintiffs sought a buy-out order in the first instance, and winding up in the alternative.

Shareholders’ Agreements and Investment Agreements – The Contractual Framework

Shareholders’ agreements and investment agreements
In sophisticated Jersey structures – particularly those involving private equity or institutional investors – the company’s articles are often supplemented by a shareholders’ agreement or investment agreement. These agreements may provide for an array of matters in relation to the company and its affairs, such as board composition, dividend policy, information rights, voting rights/veto powers and other deadlock resolution, exit arrangements and tag along/drag along rights. The matrix of documents can be complex, and inconsistencies between the company’s articles and the contractual framework for the parties’ investment often come to the fore when a dispute arises.

The interplay between contractual claims and unfair prejudice
The shareholders’ agreement or investment agreement will be the starting point for any shareholder dispute. The Royal Court in ETFS treated the shareholders’ agreement as central to the fairness analysis. On appeal, the judgment was upheld, but the Court of Appeal noted that relations between shareholders are generally governed by contract and tort, and they only move into the territory of an unfair prejudice action where they affect the conduct of the company’s affairs.

Arbitration versus litigation
If the contractual agreements provide for disputes concerning a Jersey company to be resolved via arbitration, careful thought should be given to the remedies being sought and overall strategy in bringing proceedings.

The Jersey courts have shown willingness to respect arbitration clauses in shareholder agreements. In Consolidated Resources Armenia v Global Gold [2015] JCA 061, following the English Court of Appeal decision in Fulham Football Club v Richards [2012] 1 All ER 414 (an application under the English Arbitration Act 1996), the Court held that unfair prejudice claims and just and equitable winding up claims are capable of being brought in an arbitration. However, the Court held that while an arbitrator may decide whether unfair prejudice is made out and whether winding up proceedings would be appropriate, the winding up order itself remains a matter for the Court, not an arbitral tribunal.

Forum: A Practical Comparison of Jersey and England

As already noted, the substance of Jersey jurisprudence on a number of company law remedies aligns with English law, notably in relation to claims for unfair prejudice or just and equitable winding up. Indeed, English authority is very often relied upon (albeit as persuasive rather than binding precedent) before the Jersey courts. However, there are a number of nuances which should be borne in mind.

Civil procedure
The most significant procedural divergence lies in derivative claims. England and Wales has a statutory permission regime under Part 11 of the Companies Act, with detailed criteria in section 263 including mandatory refusal where a person acting under section 172 (duty to promote the success of the company) would not continue the claim. Jersey has no equivalent codified regime: the customary law derivative action, taken alongside the procedure in Rule 6/39 of the Royal Court Rules, retains the flexibility and the limitations of the exceptions to the rule in Foss v Harbottle. The Jersey regime arguably gives the Court a wider discretion at the permission stage.

Commercial litigation in Jersey
In Jersey, English counsel do not have rights of audience. Accordingly, parties need to instruct a Jersey Advocate to appear in Court.

Given the number of commercial and financial services cases heard in Jersey, there is a bench with deep commercial experience.

While civil cases are not tried before a jury in Jersey, in contrast to the English High Court where a judge would sit alone, in the Royal Court a judge sits with two jurats. Jurats are lay judges of fact. This distinction brings an additional nuance to trying matters before the Royal Court, making the involvement of experienced Jersey Advocates all the more important.

Documents
Parties to shareholder disputes will often find that contemporaneous documents, correspondence and board papers/minutes are critical. While witness evidence (particularly from those involved in early discussions as to how the company should be run) does carry weight, the Jersey courts have followed the direction of the English courts in recent years in emphasising the importance of contemporaneous documents. In Rassmal Investments LLC v Mubarak Abdullah Al Suwaiket & Sons [2025] JRC 220, the Court followed the approach of the English High Court in Gestmin v Credit Suisse (UK) Limited [2013] EWHC 3560 (Comm) that “the best approach for a judge to adopt in the trial of a commercial case is to place little if any reliance at all on the witnesses’ recollections of what was said in meetings and conversations, and to base factual findings on inferences drawn from the documentary evidence and known or probable facts”.

The Abolition of the Shareholder Rule: Jardine Strategic and Its Implications

The decision in Jardine Strategic
One of the most consequential recent developments for shareholder litigation is the Privy Council’s decision in Jardine Strategic Ltd v Oasis Investments II Master Fund Ltd [2025] UKPC 34. That case concerned whether shareholders had a right to inspect legal advice given to Jardine Matheson group in a Bermuda dispute. The shareholders sought to rely upon the so-called “shareholder rule” that a company cannot assert privilege against its own shareholders.

The Board held that the shareholder rule forms no part of Bermudian law and used its powers (see Willers v Joyce (No 2) [2016] UKSC 44) to direct that the decision should also be applied by the English courts. The Board noted that there is not always an alignment of interest between every company and its shareholders. The ability of a company to assert privilege is fundamental.

Practical consequences
As Jardine Strategic was an appeal from Bermuda, it is not strictly binding in Jersey. However, given the Willers v Joyce declaration made in that case, it is likely to be highly persuasive. Following Jardine Strategic (and the earlier English decision in Aabar v Glencore [2024] EWHC 3046 (Comm)), litigants should not assume any right to inspect a company’s privileged documents on account of their status as shareholders.

For boards facing shareholder claims, careful thought should still be given to preserving privilege and being alert to the risk of inadvertent waiver. This is particularly so in multi-party shareholder disputes, with different shareholder factions having competing interests and the company needing to consider its position. For shareholders, the abolition of the shareholder rule narrows one avenue of discovery and places importance on early and strategic document requests wherever possible.

Parties should, however, be aware that pre-action disclosure (in the English sense) is not available in Jersey.

How can Baker & Partners help you?

Baker & Partners has significant experience in litigating shareholder disputes and frequently acts in high value claims.

Unlike many law firms, we do not operate an associated trust/fiduciary services business, which allows us to remain conflict free. This is important in shareholder litigation where parties may have engaged one or more of the fiduciary services businesses in relation to their investment. As an independent firm, we have extensive experience both acting for financial services businesses and private capital investors, as well as against them.

If you would like advice, please get in touch with your usual Baker & Partners contact, or any member of the team listed. Visit our Commercial & Civil Disputes page for more information on our Shareholder Disputes expertise.

Footnotes

1 See Jersey Set for Growth as Global SPV Demand Evolves | Insights | Jersey Finance. The full report is available on the CSC website.