Rock Nominees Ltd v. RCO (Holdings) plc
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Rock Nominees Ltd v. RCO (Holdings) plc [2004] 1 BCLC 439; [2003] 2 BCLC 493 is a UK company law case dealing with unfair prejudice under s.459 Companies Act 1985 (now s.994 Companies Act 2006). It was decided at first instance by Peter Smith J.
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[edit] Facts
Rock Nominees Ltd was part of the business empire of Lord Ashcroft, a controversial Tory peer who has been criticised for offshore tax avoidance. It is a company which holds shares on behalf of other companies. It had 201,300 shares for Gambier Holdings Inc. (a British Virgin Islands company) and 65,000 shares for Kiwi Ltd. (a Belize company) invested in RCO (Holdings) plc. Its stake made up 2.48%. RCO itself was in the cleaning, catering and security porterage business. In 2000 a company called ISS (UK) Ltd took over RCO, acquiring 96.4% of the shares. It made one of RCO's subsidiaries transfer its shares to one of ISS's subsidiaries for £30,117,784. Rock Nominee's filed for a petition of unfair prejudice on the grounds that this was a transaction at an undervalue. It did not reflect the value to the purchaser of the synergies arising from the sale or the value of avoiding risk from a sale on the open market.
[edit] Judgment
Peter Smith J, in a lengthy judgment held that the petition would be refused. Although some of the conduct by RCO constituted a breach of fiduciary duty, Rock Nominees had not discharged the burden of proof to show that the shares were transferred at an undervalue. The evidence suggested, including a report from a financial expert that Rock Nominees called, that the price did reflect a premium for "synergies". Moreover, Peter Smith J was inclined to draw adverse inferences from some of the murkier omissions in the evidence that Lord Ashcroft had given.
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