West Coast miner Allan Birchfield has been strongly advised to accept a reasonable offer for his 25 per cent shareholding in Birchfield Holdings Ltd after he was kicked off the board.
Mining company Birchfield Holdings is valued in excess of twenty million dollars. Through PLC Trust, Mr Birchfield controls one quarter of the shares; three siblings who between them hold a majority shareholding are also directors. They removed Mr Birchfield as director in 2019. The High Court was to learn of deep seated differences of opinion between Mr Birchfield and his siblings, primarily over the company’s strategic direction, its dividend policy and complaints about company resources being diverted in payment of allegedly excessive salaries. He sued, asking the High Court to have him reinstated to the board and to regulate the company’s future activities by appointing independent directors to take control. His siblings took a short-cut, getting a court ruling that Mr Birchfield’s reinstatement as director was never on the cards and that all his claims should be dismissed since they had offered to buy him out. If their brother went ahead with his case, a court ordered buy-out of his shares was the only plausible outcome, his siblings said.
Mr Birchfield appealed. Any buy-out offer would be unfair, he said. Value of company shares had been harmed by his siblings’ abject mismanagement, he claimed. He had rejected their various buy-out offers.
Buying out a minority shareholder at fair value is the appropriate remedy where a minority shareholder complains about how a company is run, the Court of Appeal ruled. Calculation of fair value can be difficult where majority shareholders’ previous conduct has affected company share value. This can include payment of allegedly excessive salaries. In this case, terms of reference previously agreed by the Birchfield family for determining fair value required that prior payment of any excess salaries be taken into account, the court said.
Mr Birchfield was given three weeks to consider the most recent buy-out offer. Terms of this offer were not publically disclosed. Failure to agree would see further litigation over what was fair value.
PLC Trust v. Birchfield Holdings Ltd – Court of Appeal (2.09.21)
21.147