Too late to complain? How limitation works in relation to shareholder rights

In the great majority of legal actions, there are time limits that govern when a formal claim must be lodged at court (under the Limitation Act 1980). 

Here, shareholder rights specialist Paul Lunt explains how limitation works in relation to shareholder disputes and unfair prejudice.

What is ‘limitation’ in relation to the law?

Lengthy delays prior to formally commencing a claim at court can mean that the right to bring a claim is lost by reason of the passage of time. Lawyers generally refer to this issue as ‘limitation’.

How does limitation work in relation to shareholder rights?

Until recently (and for many decades), it was the accepted wisdom that there could be no limitation period to claims brought by shareholders when contending that they’d been ‘unfairly prejudiced’ by the actions of the controlling shareholders. The belief was that the provisions of the Limitation Act couldn’t provide any defence to such shareholder claims. 

However, a 2024 court decision called Zedra Trust Co reversed this thinking. It decided that shareholder claims are in fact subject to the limitation periods provided for by the Limitation Act 1980. 

What this means in practice is that any shareholder contemplating bringing a claim for unfair prejudice must promptly and carefully evaluate the nature of the allegations to be made. 

Some types of claim will be lost and can’t be pursued if a legal claim isn’t commenced within six years from the date of the wrongdoing. For other types of legal claim, a period of 12 years will be the applicable limitation period. 

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If you’re thinking of bringing a claim, our shareholder rights specialists can outline your legal position as a shareholder in a private limited company and help you to navigate this complex area of law.

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