A fair Kop for majority shareholders? - Rights and restrictions on the removal of directors


For several weeks during October 2010 both the front and back pages of the UK newspapers were dominated by the attempts by the board of Liverpool Football Club's parent company to sell the Club against the vigorous objections of its ultimate controlling shareholders, the American businessmen Tom Hicks and George Gillett. At the heart of the matter was whether Hicks and Gillett were entitled, as majority shareholders, to remove certain board members who were seeking to vote in favour of the sale and replace them with their own nominees who would block it.

Ultimately, after two trips to the English High Court, the Court found in favour of the directors and the Club's principal creditor, RBS, and accordingly the sale of the Club was allowed to proceed.

Whilst the Liverpool case turned on some very specific facts, it nevertheless highlights that majority shareholders cannot assume that they can instantly fire "rogue directors" to prevent them taking decisions of which they do not approve.

In this Denison Till Corporate newsletter we consider some of the legal issues that majority shareholders need to be aware of when it comes to removing directors under English company law.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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