• A company could not force forfeiture of shares held by one of its members for non-payment of debts that were unrelated to the shares
• The Scottish courts hold that a meeting took place even though a single person (acting as proxy for multiple constituents) was present
• Regulations are made to extend payment practice reporting in relation to construction contracts

Company’s ability to forfeit member’s shares limited to amounts payable on those shares

The High Court has held that a company was not permitted to issue a call, and subsequently to forfeit, fully paid shares held by one of its shareholders on the basis that the shareholder had not paid amounts he owed the company that were entirely separate from his shareholding.

Key Choice Financial Planning Ltd v Evoy [2025] EWHC 4 (Ch) concerned a company established by two individuals (D and E). Both individuals were appointed directors and took shares in the company. E paid the full amount for his shares, meaning they were considered “fully paid” under company law.

The company adopted the Model Articles for Private Companies. However, it modified those articles to allow it to issue partly paid shares, make calls on shares (whether partly or fully paid) in respect of any amounts owing to the company (and not merely amounts unpaid on the shares), and forfeit the shares if those amounts were not paid.

E left the company but retained his shares. He brought unsuccessful proceedings against the company and was ordered to pay the company the costs of those proceedings.

When E did not pay those costs, the company served a notice of intended forfeiture on him. One month later, E had still not paid and the company served a notice stating that E had forfeited his shares in the company and was no longer a shareholder.

E contested the forfeiture. He claimed that, notwithstanding the wide wording in the company’s articles, the power to forfeit shares was limited to circumstances where the shareholder had not paid up the entire amount owing on their shares.

The court held that the forfeiture was invalid.

It reached this decision through a process of contractual interpretation. The judge held that, although the words in the article referred to “all monies payable”, these words described only amounts remaining to be paid on the shares in question.

The wide language of some of the company’s articles had to be read alongside the more specific language in other articles. Several articles relating to calls and forfeiture used the words “in respect of whose shares the call is made”. These words tied the provisions to sums outstanding on shares.

In addition, an ability to call and forfeit for amounts not related to the shares was inconsistent with the treatment of joint holders or the idea that calls could be made on subsequent holders of those shares.

As a result, the company was unable to treat E’s shares as forfeited.

We will wait to see whether the judgment prompts any change in practice. However, it would not be surprising to see some articles continue to attempt to extend lien, call and forfeiture provisions to all shares in respect of all debts. These provisions have become quite common in some scenarios.

The key point in practice is that, if a company is considering utilising its call and forfeiture provisions, it should seek legal advice first to ensure that it is entitled and permitted to do so.

You can read more about the High Court’s decision that a company could not force forfeiture of shares for debts not relating to those shares in our separate in-depth piece.

Access the High Court's decision that a company could not utilise forfeiture provisions in relation to fully paid shares

Meeting was valid where only one person attended as proxy for all attendees

The Scottish Court of Session has held that a meeting of creditors, convened to approve a restructuring plan under Part 26A of the Companies Act 2006, validly took place, even though the only person who physically attended the meeting was the meeting chair.

In the petition of Dobbies Garden Centres Ltd [2024] CSOH 111 concerned the holding company of a group that operates a well-known chain of garden centres throughout the United Kingdom.

The company ran into financial difficulties. It petitioned to the court to sanction a restructuring plan between it and seven classes of creditors under Part 26A of the Companies Act 2006 to enable it to continue trading.

The company was incorporated in Scotland. As a result, although the Companies Act 2006 applies throughout the United Kingdom, in this case, the decision whether to sanction the plan was a question of Scots law and fell to the Scottish courts to decide.

The court convened meetings of the company’s creditors to approve the plan. There were seven classes of creditor in total. These included the company’s secured creditors, four separate classes of landlord, general property creditors, and business rates creditors.

The meeting of the secured creditors was attended by nine creditors. However, all nine creditors appointed the same individual (the chair of the meeting) as their proxy. As a result, the only person who physically attended that meeting was the meeting chair.

Under the law of England and Wales, the position has been that a “meeting” is “a coming together of more than one person”, and that, where all the attendees appoint the same person as their proxy to vote at a meeting, that proxy cannot form a meeting all by themselves.

The court held that a meeting had taken place, even though only a single proxy had been present. The judge found that, for the purposes of Part 26A at least, two or more people could come together by appointing a common proxy. It would make no sense for multiple attendees to appoint a single proxy, yet for at least one of them still to attend in order to ensure a meeting took place.

The judgment is of limited direct relevance to English and Welsh companies, because it is a decision under Scots law and, arguably, limited to meetings convened by the court in connection with restructuring plans under Part 26A. However, the decision does open the door for the courts of England and Wales to entertain more flexible ways of holding company meetings.

You can read more about the court’s decision that a meeting took place with only a single proxy present, and on the Dobbies restructuring plan more generally, in our colleagues’ separate in-depth piece.

Regulations extend payment practice reporting on construction contracts

Regulations have been made to extend the UK’s regime for reporting on payment practices in relation to construction contracts.

Large UK companies and limited liability partnerships (LLPs) are currently required to publish a half-yearly report setting out their practice for paying supplier invoices, as well as statistics for their actual performance in paying invoices over the preceding year.

Construction contracts are currently covered by the regime if (as will usually be the case) they involve the supply of goods, services or intangible assets (other than financial services).

Under the new regulations (the Reporting on Payment Practices and Performance (Amendment) Regulations 2025), organisations must now publish additional information on any retention clauses in construction contracts.

The changes apply to financial years beginning on or after 1 April 2025.

Access the regulations that extend invoice payment practice reporting for construction contracts