THG Plc v Zedra Trust Company (Jersey) Ltd

This dispute came out of a familiar private company problem. A minority shareholder said the people controlling the company had used company powers in a way that treated it unfairly. Zedra was a minority shareholder in THG and brought an unfair prejudice petition under section 994 of the Companies Act 2006 against the company and several current or former directors.

The Supreme Court was not deciding whether Zedra had proved unfair prejudice overall. The appeal was about one proposed amendment to the petition and whether it had been brought too late. That timing issue matters because unfair prejudice petitions are often used in long-running shareholder disputes where complaints build up over several years.

Zedra wanted to add a complaint about a bonus share allotment on 11 July 2016. THG allotted 16,802 bonus shares after capitalising £16,802 from a distributable reserve account. The shares went to four shareholders in proportions determined by the directors and approved by a designated shareholder majority under the articles.

Zedra said it had been wrongly excluded from that bonus issue. It alleged unfair discrimination and breaches of directors' duties when the directors exercised powers to allot shares, capitalise profits and appropriate those profits among shareholders. Zedra said that, if it had received its proper shares, it would have converted them immediately before THG's September 2020 IPO and sold them at £5 per share.

That turned the amendment into more than a governance complaint. Zedra sought equitable compensation from the directors involved for the value it said it had lost. The respondents accepted that the proposed amendment met the merits threshold for amendment purposes. Their objection was that there was an arguable limitation defence, so the amendment should not be allowed.

Zedra presented its section 994 petition on 7 January 2019. Earlier strike-out proceedings did not end the case, but they narrowed it. The Court of Appeal held that allegations about the removal of co-sale rights and breach of a contractual information entitlement survived and sent the matter back to the High Court for case management and possible amendments.

Fancourt J allowed the amendment relating to the July 2016 bonus issue. He rejected the argument that it was time-barred. He relied on the then accepted view that the Limitation Act 1980 did not impose a statutory limitation period on section 994 petitions, with delay instead dealt with through the court's discretion and equitable ideas such as acquiescence.

The Court of Appeal disagreed. It held that the July 2016 complaint was time-barred because section 9 of the Limitation Act 1980 applied where the only relief sought was money, and permission for the amendment had not been granted within six years. Zedra then appealed to the Supreme Court.

So the Supreme Court was dealing with a point of principle that affects many shareholder disputes. Are unfair prejudice petitions outside statutory limitation periods, as many lawyers and cases had long assumed, or can the Limitation Act apply to them?

The central question was whether there is a statutory limitation period that can bar a member of a company from petitioning for relief under sections 994 and 996 of the Companies Act 2006. The court said that question involved three main issues.

First, is an unfair prejudice petition an action upon a specialty under section 8 of the Limitation Act 1980? If so, the default position would be a 12-year limitation period. Secondly, where the petition seeks only money, is it an action to recover a sum recoverable by virtue of an enactment under section 9, which would point to a six-year period? Thirdly, if sections 8 or 9 would otherwise apply, does section 36 disapply those time limits because the relief sought is equitable?

These questions mattered because unfair prejudice petitions are unusually flexible. If a petition is well founded, the court may make such order as it thinks fit for giving relief in respect of the matters complained of. The statute specifically allows a range of orders, including regulating future conduct, requiring acts to be done or stopped, authorising proceedings, restricting changes to articles and ordering a share purchase.

That flexibility creates a practical problem. Two petitions may both be brought under section 994, but one may really be about compensation for a past event while another may be about a buyout or future governance. The court therefore had to decide how the Limitation Act fits with a remedy regime that can produce very different outcomes depending on what the shareholder is actually asking the court to do.

The Supreme Court dismissed Zedra's appeal. Lord Hodge and Lord Richards gave the majority judgment, with Lord Lloyd-Jones and Lord Briggs agreeing. The court held that unfair prejudice petitions can be subject to statutory limitation periods under the Limitation Act 1980.

The court started with the definition of an action in section 38 of the Limitation Act, which includes any proceeding in a court of law. A petition under section 994 is a court proceeding, so it can in principle fall within the Act. The court rejected the long-standing assumption that unfair prejudice petitions sit wholly outside statutory limitation rules.

The majority held that section 8 applies as the default position. In other words, a claim for unfair prejudice is an action on a specialty, so the 12-year period under section 8 applies unless a shorter period under another provision takes over.

The court then held that section 9 can apply where the petition is, in substance, seeking a monetary order. The judgment supports looking at what is really being sought, not just the statutory label attached to the proceedings. Where the right to go to court is purely statutory and the only relief sought is the payment of money, section 9 applies and the limitation period is six years.

On the facts here, Zedra's July 2016 complaint was treated as a money claim. Zedra said it should have received bonus shares in July 2016, converted them before the September 2020 IPO and sold them at £5 per share. It sought equitable compensation from the directors involved. Because permission to amend was granted more than six years after the alleged unfair prejudice, that amendment should not have been permitted.

The court also rejected the argument that section 36 automatically disapplied the limitation periods simply because the remedy claimed was equitable compensation. The result was that the Court of Appeal had been right to hold the amendment time-barred.

This judgment is important not only because it recognises limitation periods, but also because it explains what happens inside those periods. The court said that delay can still matter when the court exercises its discretion under section 996.

The judgment draws on the relationship between limitation and equitable doctrines such as laches and acquiescence. The court explained that mere delay will be a rare case. More commonly, the issue will be delay plus prejudice to the defendant or a third party, or acquiescence by the claimant.

That means a shareholder may still face problems even if the petition is technically within the relevant limitation period. If the delay has made the case harder to defend, affected third parties or suggests the shareholder accepted the position for too long, the court may refuse relief as a matter of discretion.

At the same time, the court did not say that every future limitation question for every section 994 remedy has now been finally settled. The judgment recognises that some implications will need to be worked out in later cases. Businesses should therefore treat this case as a strong statement of principle, but not as the last word on every possible remedy pattern.

For most SMEs, the value of this case is practical. If your company has founders, early investors, employee shareholders or different share classes, old decisions about rights and value can remain live for longer than many business owners expect. But the exact risk may depend on what remedy the shareholder wants.

A shareholder asking for compensation for being excluded from a share issue may face a different limitation argument from a shareholder asking for a buyout, a governance order or an order regulating future conduct. The court said it must look and see what is really being sought. So do not focus only on the wording of the complaint. Focus on the substance of the demand.

The case also shows why constitutional clarity matters. THG's wider petition included allegations about co-sale rights and information rights. In growing companies, those rights are often split across articles, shareholders' agreements and side arrangements. If those documents do not line up, disputes become expensive and fact-heavy.

Finally, do not rely on delay alone as a complete defence strategy. A company may still face a claim years later, especially if the shareholder seeks non-monetary relief. Equally, a shareholder who waits may face limitation arguments, amendment problems and discretionary refusal of relief. Early action and good records help both sides.

If you run a founder-led or investor-backed company, treat any decision affecting shareholder value as something that may later be examined in detail. Share allotments, bonus issues, rights changes and information access decisions often happen during fundraising, restructuring or rapid growth. Those are also the moments when value shifts most sharply between shareholders.

Board minutes should identify the power being used, the approvals required under the articles, who benefits, who is excluded and the commercial reason for the decision. If a designated majority, class consent or shareholder approval is needed, record that clearly and keep the signed evidence with the company books.

If a complaint is raised, do not let it drift. A written response can narrow the issues, preserve evidence and reduce the chance that the dispute later expands into a broader unfair prejudice petition. If the shareholder is asking for money, timing may become central. If the shareholder is asking for another order, the limitation analysis may differ, but delay can still affect whether relief is granted.