THG v Zedra: Supreme Court Reopens the Door to Historic Unfair Prejudice Claims

For many years it had been widely understood that no statutory limitation period applied to such petitions. That long-standing assumption was disrupted in 2024 when the Court of Appeal held that claims under section 994 were generally subject to limitation periods under the Limitation Act 1980. The Supreme Court has now overturned that decision, confirming that no statutory limitation period applies and potentially reopening the door to claims based on historic corporate conduct.

Background

The issue arose from an unfair prejudice petition brought by Zedra, a minority shareholder in THG Plc. Zedra issued its petition in 2019 alleging that the affairs of THG had been conducted in a manner unfairly prejudicial to its interests. In 2022, it sought permission to amend the petition to include allegations relating to a bonus share issue carried out in 2016, more than six years earlier. Zedra claimed that it had been unfairly excluded from participating in that share issue and sought compensation for the loss it said resulted from that exclusion.

THG opposed the amendment on the basis that the claim was time-barred. It argued that because Zedra was seeking compensation, the claim fell within section 9 of the Limitation Act 1980, which imposes a six-year limitation period for actions to recover sums recoverable by virtue of statute. At first instance, the High Court rejected that argument and held that no statutory limitation period applied to unfair prejudice petitions. The Court of Appeal later allowed THG’s appeal, concluding that petitions under section 994 were generally subject to a 12-year limitation period as an “action upon a specialty” under section 8 of the Limitation Act, or six years where purely monetary relief was sought under section 9. Zedra subsequently appealed to the Supreme Court.

The Supreme Court’s decision

By a 4–1 majority, the Supreme Court overturned the Court of Appeal’s decision and held that no statutory limitation period applies to section 994 petitions.

The Court held that section 994 does not create a statutory obligation that can be enforced in the way required for sections 8 or 9 of the Limitation Act to apply. Instead, it simply gives shareholders the ability to apply to the court for relief where a company’s affairs have been conducted in a manner that is unfairly prejudicial.

As a result, a section 994 petition is not an action to enforce a deed or statutory obligation, nor is it a claim to recover a sum “recoverable by virtue of an enactment”. While monetary compensation may be awarded under section 996, it is only one of several possible remedies available to the court.

Because the court has a wide discretion as to the appropriate remedy, the Supreme Court concluded that it would be artificial and impractical to apply limitation periods based on the form of relief sought in a petition.

Accordingly, the Court confirmed that no statutory limitation period applies to unfair prejudice petitions.

Delay and equitable principles

Although there is no statutory time limit, this does not mean that delay is irrelevant.

Instead, issues of delay will be governed by equitable principles, most notably the doctrine of laches. 

This means that historic conduct will not automatically be time-barred, but the court may still refuse or adjust relief where a claimant has delayed unreasonably and that delay causes prejudice to the respondent.

In practice, this shifts the focus away from strict statutory deadlines and towards a more flexible assessment of fairness in the circumstances of the case.

Wider implications

The judgment may also have implications beyond unfair prejudice petitions.

In reaching its decision, the Supreme Court indicated that earlier authorities applying section 9 of the Limitation Act to certain claims under the Insolvency Act 1986, including sections 214, 238–241 and 423, were wrongly decided insofar as they treated those claims as subject to a six-year limitation period.

This suggests that the reasoning in THG v Zedra could influence the treatment of limitation issues in other areas of insolvency and commercial litigation.

Why this matters

For minority shareholders, the decision removes the risk that a claim will automatically be dismissed simply because the alleged unfairly prejudicial conduct occurred more than six years earlier.

For companies and directors, however, the ruling means that historic corporate decisions may remain open to challenge for longer than previously thought. Decisions relating to share issues, governance arrangements, dividend policies and the treatment of minority shareholders may therefore all come under scrutiny many years after the event.

The judgment also highlights the importance of clear corporate governance and careful record-keeping, particularly where decisions may affect the rights or interests of minority shareholders.

How we can help

Shareholder disputes can be complex and commercially sensitive. Our Corporate and Commercial Disputes team regularly advises companies, directors and shareholders on issues arising from unfair prejudice claims, including:

• advising minority shareholders on potential claims under section 994 of the Companies Act 2006
• defending companies and directors facing unfair prejudice petitions
• advising on corporate governance and shareholder dispute prevention
• representing clients in shareholder litigation and negotiations.

If you would like to discuss how this decision may affect your business or shareholding arrangements, please contact our Corporate Disputes team or speak to your usual contact at the firm.