TLDR:
Unfair prejudice is a legal remedy available to minority shareholders in many jurisdictions when the conduct of a company’s majority shareholders or directors is unfairly harmful to the minority’s interests, allowing court intervention.
Unfair Prejudice Remedies
The unfair prejudice remedy under Section 994 of the UK Companies Act 2006 (and equivalent provisions in other common law jurisdictions) is one of the most powerful tools available to minority shareholders in private companies. The court can grant a wide range of remedies: ordering the majority to purchase the petitioner’s shares at a fair price, ordering the company to purchase shares, regulating the conduct of company affairs going forward, requiring specific actions or restraining others, or in extreme cases ordering company winding-up.
For startup founders and investors, understanding unfair prejudice risks helps structure governance documents that minimize dispute potential. Clear provisions covering dividend policy, information rights, decision-making processes, and exit mechanics reduce the ambiguity that creates unfair prejudice claims. Shareholder agreements should include dispute resolution mechanisms — mediation, expert determination, or arbitration — as alternatives to costly court proceedings.