Minority shares
Irvine and another v Irvine and another [2006] EWHC 583


This judgment analyses the current position over the valuation of a minority shareholding, following a finding of unfair prejudice under section 459 of the Companies Act 1985.


The minority shareholding in this case was 49.96% of the shares, and the petitioner maintained that it should be valued without the usual discount applied for a minority holding. The respondent argued that the amount payable should be on a discounted basis.


The legislation does not give any guidance on how a valuation should be made, but the courts have consistently applied the principle that there should be a discount unless the company is a quasi-partnership or there are other exceptional circumstances. Even where a quasi-partnership had existed in the past, it is important to consider the circumstances in which the petitioner acquired his shares. If this was on a discounted basis, reflecting the fact that the purchase was of a minority shareholding, then, in many cases, it would be fair for those shares to be valued in the same way. Certainly, where no quasi-partnership has existed in the history of the company, it is even less likely that circumstances could exist that would justify a purchase of shares without any discount reflecting that it is a minority shareholding.


Where the company is a quasi-partnership at the relevant time, in general, the courts would expect there to be a valuation on a non-discounted basis. The obvious exception to this general rule is where the petitioner has acted in such a way as to have invited exclusion from the running of the company.


Although this case concerned a family company, it was no longer a quasi-partnership. This position had ceased on the death of one of the family members, who had left the one crucial share, and therefore control of the company, to the first respondent. Despite this difference of only one share between the two holdings, it was held that there were no exceptional circumstances to justify deviating from the usual discounted valuation of a minority shareholding. The fact that it was a minority by such a slight amount was not in itself a reason for varying this.



E-mail signatures

Nilesh Mehta v J Pereira Fernandes SA [2006] 1 All ER (Comm) 885


This appeal concerned the use of e-mail and the extent to which it can meet the requirements of section 4 of the Statute of Frauds; in particular, whether an e-mail can satisfy the requirement of a signature.


Mr Mehta had received a winding-up petition from the respondents. In return, he asked one of his staff to send an e-mail suggesting terms that he would agree to if the hearing of the petition were adjourned. These terms included a guarantee.


Mr Mehta's proposals were accepted verbally over the telephone and the petition was adjourned. Although documentation relating to the guarantee was prepared and sent to Mr Mehta, he did not sign the documentation. Therefore, the respondents wanted to rely on Mr Mehta's e-mail as written evidence of an agreement, and to argue that it constituted a signature by either Mr Mehta or someone authorised by him.


These are the requirements of section 4 of the Statute of Frauds: 'No action shall be brought... whereby to charge the defendant upon any special promise to answer for the debt default or miscarriage of another person... unless the agreement upon which such action shall be brought or some memorandum or note thereof shall be in writing and signed by the party to be charged therewith or some other person thereunto by him lawfully authorised. Failure to meet these requirements means that the guarantee is unenforceable.'


The court had no difficulty in finding that the e-mail constituted a memorandum of the agreement. It was noted that the e-mail was an offer and therefore predated the agreement, but there is clear authority that this complies with the interpretation of the Statute of Frauds developed by the courts.


The second requirement is that the memorandum must be signed. The respondents contended that the e-mail was effectively signed because it included the header 'nelmehta@aol.com'. This argument was rejected by the court. Having reviewed the authorities, it concluded that, for the purposes of section 4, a party could use his full name or his last name with or without initials, and possibly even by using a pseudonym or code, but it was essential that the party intended this as a signature. The e-mail address on which the respondents relied is automatically included when an e-mail is sent, and therefore there was no intention to include it at all or was it intended to be used as a signature.


The court referred to the Electronic Communications Act 2000, which permits ministers to issue statutory instruments necessary for the facilitation of electronic communication. It confirmed that where the principal's name was typed in the body of an e-mail, this could be sufficient to amount to a signature.


Coral Hill is an associate professor at The College of Law, London