Ebrahimi v Wesbourne Galleries Ltd [1973] AC 360

This case centres on the rights of minority shareholders.  Mr Ebrahimi had been in business with a man named Mr Nazar as buyers and sellers of expensive rugs. They were partners in the business but decided to incorporate the business as a limited company and moved to London.  Later, Mr Nazar's son was appointed as a director and became a shareholder as well, after both Mr Ebrahimi and Mr Nazar transferred some of their shares to him.  The directors were paid by director's fees and not as dividends.

There was a falling out between the directors and Mr Nazar and his son had their own meeting, at which time they passed an ordinary resolution which removed Mr Ebrahimi as a director in accordance with section 168 of the Companies Act 2006. Mr Ebrahimi then applied to the Courts to have the company wound up. Today, this application would be dealt with under section 122(1)(g) of the Insolvency Act 1986.

This case includes a discussion of the nature of a quasi-partnership company. Here, the Court was satisfied that when the partnership had been incorporated as a limited company, the directors expected the business still to be run effectively as a partnership.  Mr Ebrahimi had a legitimate expectation that the business be continued in this way. In addition, as the company had only paid its profits by way of director's fees, he was denied any income as well. 

Lord Wilberforce examined the phrase "just and equitable", which was the grounds for the application to wind up the company.  Due to the way the company had been set up and the way the directors were paid in fees rather than dividends, the House of Lords decided that Mr Ebrahimi's legitimate expectations had been breached.  This case was very fact specific and the House was keen to stress that it would not normally go beyond the legal rights set out in the Articles and other written documents of the company.

As a result, Mr Ebrahimi's application for the winding up of the company was successful as it was just and equitable.  This might today be dealt with under an application concerning the unfair prejudice of a shareholder, under section 994 to 996 of the Companies Act 2006. A particular point mentioned was that Mr Ebrahimi was supposed to work as a full time director.