The English High Court has just given its judgment in a high-profile shareholder dispute concerning the ownership of Sheffield United Football Club. The much-anticipated decision in UTB Ltd v Sheffield United Ltd and Ors will be of strong interest to insolvency practitioners as it highlights how the souring of a corporate rescue plan can spawn a myriad of legal issues for the Court to consider.
The dispute related to a joint-venture agreement between two shareholders, under which a Saudi Royal invested £10 million (through an entity known as UTB) and gained 50% control of the club (and related property assets). The investment had been solicited by Mr Kevin McCabe, a former majority owner and of the club who had been seeking to “pass the baton” of the club’s future to new owners to fund an ambitious return to the English Premier League. Mr McCabe was the principal behind the other major shareholder, known as SUL.
However, by the end of 2017, relations between the two shareholders had deteriorated, and SUL sought the dissolution of the joint venture. SUL served notice and offered to buy UTB’s shares. The move was made in the expectation that UTB would issue a counter-notice to buy SUL’s shares at the same price. However, UTB transferred 80% of its own shareholding to another corporate vehicle before serving the counteroffer to SUL, so the property call options did not have to be exercised. If effective, this move would mean that UTB was entitled to purchase all SUL’s shares at a low price, and retain the benefit of the under-rented long leases of the properties, with SUL not being able to realise their full value, and being at a loss.
UTB issued proceedings claiming specific performance of the share sale and a declaration that the property call options were not exercisable. SUL defended that claim and counterclaimed seeking a declaration that UTB was obliged to cause an exercise of the call options. SUL also brought an additional claim against UTB and its owners for damages for lawful or unlawful means conspiracy.
In a sizeable judgment delivered by Mr Justice Fancourt, he ruled against the claims of SUL and ordered that Mr McCabe must sell his family’s 50% stake to UTB. While Mr McCabe had invested in the club "out of love and loyalty", the Judge ruled the contract of sale and purchase of SUL’s shares could not be set aside. He also dismissed a claim for damages, saying UTB had not conducted affairs in a manner unfairly prejudicial to the interests of SUL. The Judge said UTB would also have to buy the club's property assets from SUL.
The comprehensive decision will be an important precedent to consider in future shareholder disputes, particularly those involving a ‘deadlock’ situation.