Success for Stephen Connolly and Jodie Wildridge before The Honourable Mr Justice Fancourt in Jusan Technologies Limited v Uconinvest LLC [2025] EWHC 704 (Ch)

March 28, 2025

In his judgment, handed down on 24 March 2025, Fancourt J dismissed an application brought by Jusan Technologies Limited (‘JTL’), by way of which it sought to strike off Uconinvest LLC (‘Uconinvest’), from its Register of Members. Uconinvest, represented by Stephen Connolly and Jodie Wildridge (both led by Paul Chaisty KC and instructed by Glenville Walker), successfully opposed JTL’s application (‘the Strike-Off Application’), which had been brought under section 125 of the Companies Act 2006.

Giving rise, in the words of Fancourt J, to ‘…some important questions about the registration of shareholders under a company’s articles of association and the ambit of section 40 of the Companies Act 2006’; the judgment provides for an insightful read, and can be found here.

Background to the Strike-Off Application

By way of a petition presented under section 994 of the Companies Act 2006 (‘the Petition’), Uconinvest  alleges that its interests as a shareholder in JTL have been unfairly prejudiced as a result of the conduct of JTL’s directors and its holding company Jysan Holding LLC (a company incorporated in Nevada). Uconinvest successfully obtained a Worldwide Freezing Injunction against JTL and Jysan Holding LLC in February 2024; which was replaced with a further Freezing Injunction against JTL at the return date hearing in April 2024.

At that return date,  JTL applied to have the Petition stayed under section 9 of the Arbitration Act 1996 on the basis of an arbitration clause contained within a Shareholders Agreement, which had purportedly been acceded to by Uconinvest. Fancourt J ultimately found that Uconinvest was not bound by that Shareholders Agreement, and as such, nor was it bound by the arbitration clause contained within it (the judgment can be found here).

In response to the dismissal of its application, JTL brought the Strike-Off Application. The Petition was, on that occasion, stayed pending the determination of the Strike-Off Application.

The Strike-Off Application

The basis of the Strike-Off Application was that JTL’s directors had acted ultra vires their powers (as set out in its Articles of Association) in registering Uconinvest as a shareholder. Whilst accepting that the Court had a discretion under section 125 of the Companies Act 2006, JTL argued that the Court simply could not properly exercise that discretion in favour of Uconinvest in circumstances where its registration had been ultra vires.

In dismissing the Strike-Off Application, Fancourt J found:

• first, that Uconinvest was able to rely upon section 40 of the Companies Act 2006, which provides that, in favour of a person dealing with a company in good faith, the power of the directors to bind the company is deemed to be free of any limitation under the company’s constitution; and
• second, that even if he was wrong about that, he would have exercised his discretion under section 125 of the Companies Act 2006 to refuse rectification of JTL’s register of members.

Section 40 Companies Act 2006

Fancourt J found that, insofar as section 40 is concerned, a shareholder is in no different position from a person with no existing relationship with a company (paragraph 79 of the Judgment), and that:

‘Sections 39-42 of the Act of 2006…are clearly intended to operate as a single, coherent and comprehensive code in relation to the capacity of a company and the powers of its directors to bind it, and do not leave a gap through which undefined and uncertain categories of “third party” or “insider” (neither of which terms is used in the statute) can fall’ (paragraph 77 of the Judgment).

In those circumstances, JTL’s further argument was that although the sale and purchase agreement, by way of which Uconinvest purchased its shares in JTL, might have been a transaction falling within section 40 by virtue of the fact that it was a transaction with a non-shareholder, the later act of registration was a separate, unilateral act by the directors of JTL, and was not an act to which Uconinvest was a party (and therefore was not a transaction to which section 40 could apply). Fancourt J rejected this analysis, finding that:

‘Under section 40, a person can be dealing with a company in good faith where the otherwise invalid act is only part of the transaction. If that were not so, any unilateral step that was part of a larger transaction could fall outside the reach of the section’ (paragraph 94 of the Judgment).

Discretion

In case he was wrong about the applicability of section 40 to the registration of Uconinvest as a shareholder of JTL, Fancourt J went on to consider the exercise of his discretion under section 125 of the Companies Act 2006. Given a concession made by JTL earlier in the litigation, Uconinvest had only to satisfy the Court that there was a realistic, as opposed to fanciful, prospect of rectification being refused.

In the circumstances, Fancourt J held that he would have exercised his discretion against rectification of the register; and proceeded to dismiss the Strike-Off Application.

Conclusion

It is now more certain that section 40 of the Companies Act 2006 is intended to be comprehensive, and complete, with no room for carve-outs or judge-made exceptions. The decision provides a welcome clarification of the scope of the section; and serves as a useful reminder to companies, and to their directors, of the mischief that the section was designed to eradicate.