Background

Two family members were in dispute regarding their family company. The claimant alleged that the defendant conducted the affairs of the company in a way that was unfairly prejudicial to her interests under Section 994 of the Companies Act 2006; this included conducting trading activities with the defendant’s related companies that were in direct competition with the family company. The claimant also alleged that the defendant, as a director of the family company, received unauthorised director’s remuneration.

The defendant denied that there was any unfair prejudice to the claimant as his actions ultimately benefited the family company and, by extension, the claimant.

FRP was instructed to provide forensic accounting and valuation expertise on behalf of the defendant.

Action

Our Forensic Services team quantified the nature and extent of the sales, purchases, trades, stock movements, recharges and reconciliations between the family company and related companies, based on available information such as financial statements and Sage records.

The team investigated and confirmed the director’s remuneration. It was also able to value the claimant’s shareholding in the family company at two different dates, having reconstructed its accounts – immediately before the start of the allegations of unfair prejudice, and at the latest financial year. The valuation was undertaken on two alternative bases, including and excluding the director’s remuneration, to take account of the claimant’s allegation that the remuneration paid to the defendant was unauthorised.

Outcome

Our Forensic Services team prepared an expert witness report that set out the findings of the forensic accounting analysis, and the valuation of the claimant’s shareholding. A joint statement of experts was also subsequently prepared with the claimant’s expert.

The parties considered the findings and valuations of both independent forensic accountants and reached a settlement through mediation.