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BVI: Can beneficial shareholders really bring unfair prejudice claims without the legal owners?

There are several circumstances in which a beneficial owner of shares may wish to bring an action for unfair prejudice without the participation of the legal owner of his shares. These include where the legal shareholder holds shares both for his own benefit and on trust for others, as often seen in family companies; or where a nominee is the legal shareholder for numerous different beneficial owners who may have competing interests. But is it really possible? In Headstart Class F Holdings Ltd and another v Y2K Finance Inc (BVIHCV 278 of 2007), the claimant, Headstart, brought an unfair prejudice claim in relation to shares registered in the name Citco. Headstart said that it was the beneficial owner of the shares and Citco was its nominee. Citco was joined to the proceedings, and the defendant, Y2K, applied to strike out the claim on the basis that there was no evidence of the nominee/beneficiary relationship, so Headstart did not have standing. The judge at first instance considered the English case of Atlas Ltd & ors v Brightview & ors [2004] BCC 542, and found that s184I permits “applications made by both nominee shareholders and beneficial owners of shares”.  Unfortunately this is not what Atlas says.  The difficulty is that the finding by the first instance judge in Citco Global was based on a clear misreading of the Atlas case, where she confused the English Court’s findings in relation to nominee shareholders (who can bring a claim for unfair prejudice) and in relation to beneficial owners (who cannot, unless the claim is already being brought by a the legal holder of its shares). On appeal by Citco (Headstart was not a party to the appeal), the Court of Appeal noted that the judge at first instance concluded “that section 184I of the BVI Business Companies Act can be interpreted to include applications made by both nominee shareholders and beneficial owners of shares”, though it did not express any view on this or refer to the decision in Atlas. The current position in the BVI therefore appears to be that an unfair prejudice claim may be brought by either a legal shareholder or a beneficial owner.  But this is probably not good law, and likely to form the basis of fresh attempts to have the Court of Appeal re-visit the matter.

BVI: Can beneficial shareholders really bring unfair prejudice claims without the legal owners?

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