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Case study: section 994 buy-out of a minority shareholder in a UK–China joint venture restaurant group

By Leon Chua · Partner · 9 May 2026

An anonymised illustration of how a section 994 unfair-prejudice petition runs in practice. The case settled on the steps of trial after a buy-out at fair value. Names, sums, and identifying details have been changed; the underlying procedural shape is representative of work the firm regularly undertakes.

The facts

A Chinese investor (the petitioner) held a 30% interest in a UK private company operating a chain of restaurants in three English cities. The other 70% was held by a UK-resident married couple (the respondents) who managed the business day-to-day. The shareholders' agreement provided for board representation by both sides and unanimous director approval for matters above a defined threshold.

Two years in, the petitioner discovered that:

  • A second restaurant company had been incorporated by the respondents and was leasing equipment from the original company at below-market rates;
  • Director loans had been drawn down by the respondents without board approval;
  • Quarterly management accounts — required under the SHA — had not been provided for over a year.

The petitioner instructed Duan & Duan UK LLP after a London-based business contact recommended the firm.

The legal route

The petitioner had three potential routes: a derivative claim by the company (cumbersome and procedurally exposed), a winding-up petition on just-and-equitable grounds (commercially destructive), or a section 994 unfair-prejudice petition seeking a buy-out. We advised on the third.

The petition was issued in the Companies Court (Chancery Division of the Business and Property Courts) under the Companies (Unfair Prejudice Applications) Proceedings Rules 2009 (SI 2009/2469) and Practice Direction 49A. Pleaded conduct: (i) diversion of opportunity to the related company, (ii) extraction of value by directors' loans, and (iii) breach of the SHA's reporting covenants.

Interim relief

Within four weeks of issue we obtained an interim injunction restraining further inter-company trading at non-arm's-length terms and an order for inspection of the company's accounting records under section 388 of the Companies Act 2006.

Valuation

A single joint expert (forensic accountant) was instructed to value the petitioner's 30% holding on a going-concern basis at the date of the petition. The respondents accepted the principle that no minority discount should apply on a quasi-partnership basis (consistent with Re Bird Precision Bellows Ltd [1986] Ch 658). The expert added back the value extracted via the related-party arrangements.

Settlement

The case settled on the steps of trial, by way of a buy-out at the joint expert's figure with structured payment terms over twelve months and a security package over UK real estate held by the respondents. Costs were paid by the respondents on the standard basis.

What it took

  • 8 months from instruction to settlement.
  • Pleadings and witness statements drafted in English; client correspondence and conferences in Mandarin.
  • One contested interim hearing; the substantive trial was vacated on settlement.
  • A single joint expert, instructed jointly with respondents' counsel.

Why this kind of case settles

Most well-pleaded section 994 petitions settle. The respondents face the prospect of contested trial costs, public proceedings, and an order they cannot fully predict. The petitioner faces the cost and time of trial. Where the valuation can be agreed (or determined by a single joint expert) and the buy-out funded over time, the commercial logic for both sides is to settle.

For more on the firm's section 994 practice see Chinese shareholder dispute in London: a UK solicitor's guide for unfair prejudice and joint venture breakdowns and the cross-border practice hub at /uk-china-disputes/.

Contact

Leon Chua (Partner) and Jackson Ng MCIArb (Partner & Barrister) lead the firm's section 994 and cross-border shareholder-dispute practice.

This case study is anonymised. Names, sums and identifying details have been changed. Past results do not guarantee similar outcomes; each shareholder dispute must be assessed on its specific facts. Duan & Duan UK LLP is a limited liability partnership registered in England and Wales (OC427307), authorised and regulated by the Solicitors Regulation Authority (SRA number 659252).

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