Soham has an 8% shareholding in Fiercer Limited (FL), a family business, previously operated as a partnership by Soham and his two cousins Jac and Alix. On incorporation of the business, Jac and Alix were appointed as the only two directors (and they also own 46% each of the issued share capital). However, they assured Soham they would always listen to and value his opinion about the management of FL. Over the last few years, Soham has noticed that his dividend payments have declined. Whenever he has challenged Jac and Alix, they say that owing to the recession, there has been less profit to distribute to any of the shareholders, including themselves. Actually, what has happened is that Jac and Alix have been using retained profit to expand FLs business rather than pay a dividend.

They have also been using FLs premises on occasions for the purposes of an entirely different business, Sideline Limited (SL), which Jac and Alix are running together. Last week, Jac informed Soham that this year there would be no dividend payment at all paid to any shareholder. This is particularly bad news for Soham, as he has just committed to a three year degree programme studying fashion, and was relying on the income from his shareholding to assist him to fund that. He has no other source of income, having given up his job in order to devote time to his studies.

Soham feels very disappointed and wants his money back, so he can invest in a company which is paying dividends. Advise Soham as to whether he can bring a case that FL has been run in a manner that is unfairly prejudicial, or whether any conduct has taken place which would justify winding up FL. (Note: for the purposes of this assessment, you do not need to refer to the possibility of a derivative claim.) Include in your answer a discussion as to the way the law in this area has developed to date and any reform you consider might be necessary.