In Cosmetic Warriors Limited & Lush Cosmetics Limited v Andrew Gerrie [2017] EWCA Civ 324, the Court of appeal held that the Articles of Association created a statutory contract setting out how the shares had to be valued.  As no provision was made for discounting a minority holding no discount should be applied.

Following a prolongued shareholder dispute, an 11% shareholder left the company. This triggered share transfer provisions in the Articles and the need for a Company Share Valuation.

The Articles provided that in the event of a shareholder leaving the shares could be purchased by the company at an agreed price or at fair value, being the median of two valuations certified by independent chartered accountants calculated on a going concern basis.

The company argued that:

  • Fair value was the value as discounted for a minority holding: a purchaser would be expected to pay less than the pro rata value of the company to reflect the lack of control and marketability of a minority shareholding.
  • Further that the Articles should not be construed as putting an artificial value on the shares; the reference to a going concern basis simply meant not on a (for example) break up basis.

The Court of Appeal disagreed:

  • 'Fair value' in this case could not be a discounted value as the relevant transfer provisions did not distinguish between buying shares from a minority or majority shareholder and the size of the shareholding of a purchasing shareholder would always be unknown. Fair value was therefore a pro rata proportion of the value of the whole equity of each company
  • The Articles created a statutory contract and its provisions prevailed.

It was also unclear from the Articles whether the transfer provisions allowed a person, who was a company to buy shares from a departing shareholder.

Even though the Articles did in one place distinguish a company from a person, it was held that in the rest of the Articles a person was defined an individual or a body corporate.


In many cases of shareholder dispute the parties conclude that the cost of legal action outweighs the benefit. This case serves to show that all shareholders should read the Articles and ensure that they understand them: they are a contract. 

This may be appealed further as the Supreme Court held, in Wood v Capital Insurance Services Ltd [2017] UKSC 24, that in the event of rival constructions of a contract weight should be given to the “construction (which) is more consistent with business common sense”.

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Cosmetic Warriors Limited & Lush Cosmetics Limited v Andrew Gerrie [2017] EWCA Civ 324