The minority shareholders in Maven Wealth, Lord and Davies, sold their A and C shares to the majority shareholders whilst retaining their B shares. The articles and shareholders’ agreement were agreed at the time of sale. The minority shareholders were subsequently removed as directors due to claimed misconduct. This was a “Transfer Event” under the articles. This meant that the remaining B shares had to be transferred at the bad leaver price of “25% of the Fair Value”.

The dispute was about whether the correct procedure for valuation was under the shareholders’ agreement, as Lord and Davies claimed, or under the articles.

The claimants said that the definition of “Fair Value” imported the procedure set out in the shareholders’ agreement. They also said that the entire agreement provision meant the articles and shareholders’ agreement should be read together, and an express provision said that the shareholders’ agreement prevailed in the event of a conflict.

The defendants said you just needed to look at the articles, and the cross-reference to the definition of “Fair Value” in the shareholders’ agreement was to the formula not the procedure.

The court agreed with the defendants saying that the sensible reading was that the definition was used to explain what “Fair Value” was, not how it was to be arrived at. In short “The only basis on which one might find a genuine conflict between the provisions of the Articles and [the shareholders’ agreement], rather than some fairly unimportant untidiness, is by approaching the construction exercise in the spirit of literalism that has for many years rightly been deprecated.”

Judgment: Lord v Maven Wealth