The High Court has ordered the respondents in an oppression petition to buy Donegal Investment Group plc’s shares in ELST, at a valuation linked to two earlier decisions. The court declined to order a sale of the company or require Donegal to buy the respondents’ shares.
The order was made by Mr Justice Brian J. McGovern on 21 May 2015, in the final phase of litigation under section 205 of the Companies Act 1963. The respondents had admitted unspecified acts of oppression to establish the court’s jurisdiction. They also conceded, as a sample act, that the company bought a mushroom business in Canada without bringing the matter to the board for approval.
The court had previously decided, in a valuation module, that Donegal’s shares should be valued without a minority discount. It had also ruled in separate proceedings that the respondents could exercise an option entitling them to 70% of ELST’s shares. The final hearing concerned the remedy for the oppression; it did not revisit those decisions.
Three remedies were considered: realisation of the company under a shareholders’ agreement, a purchase of Donegal’s shares by the respondents, or a purchase of the respondents’ shares by Donegal. The judge said it would be exceptional to require a minority shareholder to buy out the majority. He found that Ronnie Wilson had driven the company and that he and members of his family were actively involved in its day-to-day management. Donegal’s board representatives had taken a relatively passive role. The court found no evidence of dishonesty, fraud, asset divestment, illegal use of company funds or other serious misbehaviour that would justify such an exceptional order.
The judge also declined to order a realisation under the shareholders’ agreement. Its six-year period had expired without either party seeking a realisation, and the court was not satisfied an initial public offering would achieve greater value for Donegal. It had no evidence about the effect a forced sale would have on the company’s market value.
Donegal had sought €34 million during discussions known as the Investec Process. The judge said the earlier valuation decision meant the shares would be valued at €30.6 million. He ordered the respondents to purchase Donegal’s shares at a valuation referable to the 5 December 2014 judgment and taking account of the respondents’ option rights as determined on 16 January 2015.