Jusan Technologies Limited v Uconinvest LLC [2025] EWHC 704 (Ch)

[2025] EWHC 704 (Ch)Case No CR-2024-MAN-001069
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS IN MANCHESTER
INSOLVENCY AND COMPANIES LIST (ChD)
COMPANIES COURT
Civil Justice Centre
1 Bridge Street West
Venue MANCHESTERDate Monday, 24 March 2025
M60 9DJ
Before
MR JUSTICE FANCOURTVice-Chancellor of the County Palatine of Lancaster
Between
JUSAN TECHNOLOGIES LIMITEDClaimant- and –
Between
UCONINVEST LLCDefendant
Mr Tony Singla KC and Mr Tom Pascoe (instructed by Willkie Farr & Gallagher) for ClaimantMr Paul Chaisty KC, Mr Stephen Connolly and Ms Jodie Wildridge (instructed by Glenville Walker LLP) for DefendantHearing Hearing dates: 19 (Pre-reading), 20 February 2025
APPROVED JUDGMENT

The Vice-Chancellor :

[1]This Part 8 claim arises in unusual circumstances and was tried without oral evidence, over a single day as it turned out. It nevertheless gives rise to some important questions about the registration of shareholders under a company’s articles of association and the ambit of section 40 of the Companies Act 2006 (“s.40”), the heading of which is “Power of directors to bind the company”.[2]The claim is for an order pursuant to section 125(1) of the Companies Act 2006 (“s.125”) rectifying the register of members of the Claimant company (“JTL”) by deleting the name of the Defendant (“Uconinvest”) with retrospective effect to 7 March 2023. That was the date on which the directors of JTL registered Uconinvest as the holder of 12,255,099 B Ordinary shares in JTL (“the B shares”). Uconinvest had bought the B shares from JTL itself, under a sale and purchase agreement between JTL as seller and Uconinvest as buyer dated 29 December 2022 (“the SPA”).[3]S.125, as amended by section 47 of the Economic Crime and Corporate Transparency Act 2023, provides (so far as material):
“(1) If a company’s register of members – (a) does not include information that it is required to include, or (b) includes information that it is not required to include, the person aggrieved, or any member of the company, or the company, may apply to the court for rectification of the register. (2) The court may either refuse the application or may order rectification of the register and payment by the company of any damages sustained by any party aggrieved.”
Neither party suggested that this new subsection (1) changes the application of s.125 to a case of entry of a person’s name on the register without sufficient cause, as the previous version of the subsection expressly stated.

(b) includes information that it is not required to include,

[4]The claim was issued by JTL following my decision in different proceedings between these parties and others: a petition presented by Uconinvest dated 27 February 2024, pursuant to section 994 of the 2006 Act (“the Unfair Prejudice Petition” or “the Petition”), seeking relief against unfairly prejudicial conduct by JTL’s directors and majority shareholder, and a separate arbitration claim by the respondents to the Petition, seeking a stay of it pursuant to s.9 of the Arbitration Act 1996.[5]I heard the arbitration claim together with an application to set aside a freezing injunction that I had previously granted Uconinvest in the Unfair Prejudice Petition.[6]In my judgment, handed down on 20 June 2024 ([2024] EWHC 1632 (Ch)) (“the 2024 Judgment”), I refused to stay the Petition, on the basis that Uconinvest is not bound by an arbitration agreement in the JTL shareholder agreement (“the SHA”), but I set aside the freezing injunction on the basis of failure of full and frank disclosure. I re-granted a more limited injunction in favour of Uconinvest until trial or further order.[7]On 8 October 2024, a directions hearing in the Petition and the first hearing of the Part 8 claim took place together. I will return to the directions that I gave at that hearing and the reasons for them shortly, but I need first to give some background to explain the origin of the Part 8 claim.

The Unfair Prejudice Petition and the Stay Application

[8]In the Unfair Prejudice Petition, Uconinvest makes very serious allegations in (broadly) five different categories against the three directors of JTL and the majority shareholder that appointed them, Jysan Holding LLC (“Jysan”). These are summarised at [6] of the 2024 Judgment and the evidence relating to them at [16]–[42]. It is unnecessary to rehearse them again here. It has not been suggested by the respondents to the Petition that Uconinvest does not have a good arguable case on any of the categories, though all the allegations are disputed.[9]The owner of the shares in Uconinvest is a Mr Orynbayev, formerly Deputy Prime Minister of Kazakhstan, who was closely involved in establishing JTL as a company with very substantial assets, primarily in Kazakhstan. As a reward for his efforts, the US charitable foundation that owns the shares in Jysan agreed on 1 April 2021 to grant Mr Orynbayev shares in JTL, as a result of which he was allotted the B shares and registered as a member of JTL.[10]By May 2022, the other registered members of JTL were Jysan and a company known as QAZ42. On 16 May 2022, Mr Orynbayev sold the B shares back to JTL at par and the shares were held in Treasury. The exact reasons for this are still unclear. Mr Orynbayev asserts that it was intended only to be a temporary arrangement and that the shares remained held by JTL for his benefit.[11]By December 2022, Mr Orynbayev wanted the B shares back. The directors of JTL and Jysan did not oppose this, and legal advice was taken about how it should be done. The advice was that the shares had to be sold back to Mr Orynbayev for cash consideration. Mr Orynbayev was content with this course but requested that the shares be sold to his company, Uconinvest, rather than him. He had in mind to sell half of the B shares to Mr Wahid, one of the directors of JTL.[12]The legal advice obtained by JTL, which was shared with Mr Orynbayev, pointed out that its articles of association required Uconinvest to execute a deed of adherence to the SHA, to which JTL, Jysan and QAZ42 were parties. Without that (or the agreement of all shareholders) the directors could not register Uconinvest. The SHA contains an arbitration agreement. Sale of the B shares required the approval of the board of JTL and a majority of the A Ordinary shareholders.[13]On 29 December 2022, JTL and Uconinvest entered into the SPA. I deal with its relevant terms later in this judgment. This was approved by the board of JTL and by Jysan, as the majority shareholder.[14]On about 3 January 2023 (though the deed is dated 29 December 2022), Uconinvest executed and delivered to JTL a deed of adherence to the terms of the SHA. This was in the form of a deed of novation requiring execution by Uconinvest as transferee of the B shares, Jysan and QAZ42 as continuing shareholders, and JTL itself.[15]As explained in the 2024 Judgment, QAZ42 did not execute the deed of adherence (though Jysan and JTL did), and so it did not come into effect. That meant that Uconinvest had not become bound by the terms of the SHA and so was not bound by the arbitration agreement contained in it. The same conclusion was reached in relation to a later deed of adherence dated 26 January 2023, which Uconinvest executed as a continuing shareholder but, again, QAZ42 did not execute. JTL’s arbitration claim therefore had to be dismissed.[16]Despite the ineffectiveness of the deeds of adherence, Uconinvest was in due course (after a delay) registered as a member of JTL. Whether JTL’s directors, or the directors of Jysan, knew at the time of registration that Uconinvest was not bound by the deed of adherence, or that the requirements of the articles had not been complied with, is unclear at this stage.[17]As a result of Uconinvest’s argument that it was not bound by the terms of the SHA, JTL contends that it and its directors did not have power under JTL’s articles of association to register Uconinvest as a member. This Part 8 claim was accordingly issued to have Uconinvest removed from JTL’s register of members.

The 8 October 2024 Directions Hearing

[18]JTL served detailed Points of Claim with its Part 8 claim. These assert that its directors “permitted the registration of Uconinvest on the (false) basis that Uconinvest had entered into a valid deed of adherence and was, therefore, bound by JTL’s shareholders’ agreement …” and allege a contravention of article 12(2) of JTL’s articles. They explain that rectification is now sought to regularise the position and remedy the breach. The Points of Claim also allege a breach of the terms of the SHA, which are in this respect to broadly similar effect as article 12(2).[19]The Points of Claim plead that, as Uconinvest had not in law adhered to the shareholder agreement as required by article 12(2), the registration was ultra vires the directors’ powers to register the share transfer. It was also said to be fundamentally unjust that Uconinvest can proceed with the Petition in the High Court and enjoy the benefits of being a member of JTL without being subject to the obligations of other shareholders under the SHA, in breach of JTL’s constitutional documents.[20]The Points of Claim also plead that registration as a member of JTL gives Uconinvest standing to pursue its Unfair Prejudice Petition, and that the outcome of the Part 8 claim would have a direct bearing on the Petition, such that it was important that the Part 8 claim be heard first.[21]At the hearing on 8 October 2024, Uconinvest’s position was that the Part 8 claim potentially gave rise to significant and disputed factual issues (despite what JTL said in its claim form) and that what was needed was directions for full statements of case in the Petition before a decision could be taken about whether to consolidate the Part 8 claim with the Petition, or hear the Part 8 claim first, or direct the trial of a preliminary issue in the Petition, and if so what issue. There would be an estoppel claim in any event, in response to the Part 8 claim, Uconinvest said. In those circumstances, the right approach was further case management of both claims, not a direction for trial of the Part 8 claim or a particular issue at that stage.[22]JTL’s position was that the issue in the Part 8 claim was preliminary to any consideration of whether Uconinvest could pursue the Petition or, if so, what complaints it could legitimately pursue. Accordingly, in terms of case management, the right approach was to direct a trial of the Part 8 claim first. JTL had indeed issued an application on 30 September 2024 to stay the Petition until after the Part 8 claim.[23]To support its case, Mr Singla KC, on behalf of JTL, argued that the issue in the Part 8 claim was a very limited issue of law, namely whether the registration of Uconinvest as a member was ultra vires. If it was, he said, that was the answer to the Part 8 claim, because the court could not conceivably refuse to rectify the register if the directors of JTL never had power to register Uconinvest as a member. On that basis, he urged me to direct a trial of the Part 8 claim first. He said that if JTL was right about the rectification claim, that was the end of the case, because Uconinvest would have no standing to pursue the Petition.[24]I asked Mr Singla whether the way that he was intending to argue the ultra vires point meant that the lack of authority could not be remedied, so that even if the factual allegations made (or to be made) by Uconinvest were established, that would not defeat the claim. Mr Singla agreed that that was the case. I sought clarification that, if it emerged on hearing the Part 8 claim that JTL was wrong in saying that the narrow issue decided the case, the Part 8 claim would fail. That was confirmed by Mr Singla too.[25]I told Mr Singla that I wanted to have clarity about what JTL alleged were the relevant facts, on the basis of which its legal argument for rectification would proceed, and that there needed to be absolute clarity before the Part 8 claim would be heard on that basis. The relevant facts were initially confirmed as being the content of article 12(2) of JTL’s articles and my decision that the two executed deeds of adherence did not have legal effect. Mr Singla stated that any other argument of the type that Mr Connolly had raised on behalf of Uconinvest (such as waiver and estoppel) was completely irrelevant. A third fact was then added: no prior consent of the A Ordinary shareholders to Uconinvest being registered without adhering to the SHA. Mr Singla said that he thought that no one was suggesting that QAZ42 had consented to that, but Mr Connolly said that that fact was not agreed by Uconinvest, and so disclosure was ordered in relation to that single disputed factual issue.[26]I put to Mr Singla:
“ …just to be absolutely clear, if I am persuaded at the hearing that you propose, that other facts relied on by Mr Connolly make it arguable, properly arguable, that the defect was not irredeemable, then you lose?”
Mr Singla answered: “Yes”. Mr Singla later clarified that his position was that any such matter was irrelevant in law, even if factually arguable, and that the question of legal relevance was for final determination at the proposed trial.[27]On that basis, it was urged on me that a trial of the Part 8 claim, narrowly confined in that way, could be brought on and determined quickly. The evidence previously filed by Mr Orynbayev in response to the Part 8 claim was said by JTL to be irrelevant, and it indicated that it would not be filing evidence. On that narrow basis, Mr Connolly was inclined to accept that the Part 8 claim could be very swiftly heard and should come first. It was not said that success for JTL would make no difference to Uconinvest’s standing as Petitioner.[28]I therefore agreed to stay the Petition until the Part 8 claim had been tried. The Order dated 8 October 2024, following the hearing, recited that JTL confirmed that its Part 8 claim was pursued only on the limited basis set out in paragraph 11 of the Order, and its concession that the claim fell to be dismissed if it did not prove its case on that basis. Paragraph 11 states: “11. The issue for determination at the hearing of the [Part 8] Claim shall be whether the shareholder register of JTL ought to be rectified under s.125 of the Companies Act 2006, so as to remove Uconinvest as a shareholder, on the basis that the registration of Uconinvest as a shareholder of JTL was ultra vires its directors, in light of only the following facts relied upon by JTL:11.1 the existence and wording of Article 12(2) of JTL's Articles of Association;11.2 the fact that the Petitioner did not become a party to or bound by the [SHA]; and11.3 if proven, the fact that, at the time of registration, not all of the holders of the A Ordinary Shares in JTL consented to register Uconinvest; and that in consequence the Court could not properly exercise its discretion to refuse rectification.” 11.1 the existence and wording of Article 12(2) of JTL's Articles of Association; 11.2 the fact that the Petitioner did not become a party to or bound by the [SHA]; and 11.3 if proven, the fact that, at the time of registration, not all of the holders of the A Ordinary Shares in JTL consented to register Uconinvest;

The Articles of Association

[29]The following articles are material. Article 5 provides:
“Nothing in these articles shall constitute a restriction on the objects of the Company to do (or omit to do) any act and, in accordance with section 31(1) of the Companies Act, the Company’s objects are unrestricted.”
This article therefore confirms, consistently with section 39(1) of the 2006 Act, that the capacity of JTL as a company is not restricted.[30]Article 12 provides as follows (so far as material): “(1) The directors shall refuse to register the transfer of any shares or of any interest in any shares held by any shareholder unless they are satisfied that such transfer is either:(a) a transfer permitted under article 13 (a Permitted Transfer); or(b) ……. (2) If, in relation to a transfer of a share, the transferee is not a party to any shareholders’ agreement or similar document in force between some or all of the shareholders and the Company, then the directors shall, unless otherwise permitted by the prior consent of all the holders of the A Ordinary Shares at the relevant time: (a) require the transferee of such share to deliver to the Company a deed agreeing to be bound by the terms of any shareholders’ agreement or similar document in force between some or all of the shareholders and the Company in any form as the directors may reasonably require (but not so as to obligate the transferee to have any obligations or liabilities greater than those of the transferor under any such agreement or other document); and (b) decline to register the transfer of such share unless and until the transferee has done so and delivered the same to the directors at the Company's registered office …..” (a) a transfer permitted under article 13 (a Permitted Transfer); or (b) …….[31]Article 13 provides as follows (so far as material):
“……. (2) Subject to article 12: (a) prior to 3 April 2024, any holder of any B Ordinary Shares that were in issue as at the Adoption Date (irrespective of whether that holder is an initial holder of B Ordinary Shares or a subsequent holder of B Ordinary Shares with respect to such B Ordinary Shares); and (b) for the duration of a period of three years from the relevant date of issue, any holder of any other B Ordinary Shares, shall, in each case, only be permitted to transfer any such B Ordinary Shares or an interest in any such B Ordinary Shares to any person with (A) Majority A Shareholder Consent or (B) the prior written consent of a majority of the directors ….”
[32]Relevantly, clause 12.3 of the SHA states:
“Except as expressly provided in the Articles or this Agreement, the parties shall procure that no transfer of shares shall be registered by the Board unless the transferee of such shares has executed and delivered a Deed of Adherence.”
The form of the deed of adherence is a multilateral novation agreement, set out in Schedule 1 to the SHA.[33]It is not in dispute that the transfer of shares by JTL to Uconinvest was a “Permitted Transfer” within the meaning of article 12(1), nor is any argument pursued on behalf of Uconinvest that that means that article 12(2) does not have to be satisfied. Accordingly, the only issues in dispute relate to the meaning and effect of article 12(2) and whether its requirements were satisfied. There are three such issues. The Issues of Compliance with Article 12(2) Issue 1: Must the deed be legally effective before registration?

The Issues of Compliance with Article 12(2)

[34]The first question is whether, on the true interpretation of article 12(2), assuming that there is no prior consent of all the A Ordinary Shareholders and on the basis that the Permitted Transferee has validly executed and delivered a deed of adherence in the form required by the directors, they have power to register the Permitted Transferee only if and when the deed has legal effect, or following delivery of the deed irrespective of its legal effectiveness.[35]Mr Chaisty KC, on behalf of Uconinvest, suggested in writing that a restrictive approach to interpretation of this article should be taken, by analogy with the case of Greenhalgh v Mallard [1943] 2 All ER 234, in which it was held that articles that restrict the property rights of shareholders should be given a narrow interpretation (i.e. in favour of the shareholder and against the company) rather than a broad interpretation. That argument was not pursued orally – rightly, in my judgment, as a requirement that the directors do not register a transferee of a share unless the transferee has adhered to any existing shareholder agreement does not restrict the right of a shareholder to sell their shares. As Mr Singla observed, a provision such as this in a company’s articles is far from unusual and is for the benefit of all shareholders.[36]What Mr Chaisty did argue was that it cannot have been intended that JTL’s directors could supply the transferee with a deed in a form that depends on execution by third parties to make it effective but then refuse to register. If so, the directors could fail to obtain that further execution, thereby preventing the transferee from being registered. Mr Chaisty pointed out that it is not article 12(2) that requires a deed of novation between all the shareholders and JTL, but only clause 12.3 of the SHA. In this case, Uconinvest in good faith executed the form of deed that was put before it; did exactly what was required of it; had no reason to assume that QAZ42 would not execute it; and believed that it had been validly registered as a member. It could not be a correct interpretation of the article, he suggested, that if a transferee has done everything that it is required to do, so that it is bound by the deed, the directors have no power to register it because another party has failed to execute the deed and be bound. (This was not quite right, however: the deed did not bind Uconinvest on delivery, as it was conditional on all parties executing it.)[37]Mr Singla argued, on the contrary, that the article requires a deed executed and delivered by the Permitted Transferee that has legal effect before that person can be registered, otherwise the purpose that clearly underlies article 12(2) – to ensure that all shareholders are on an equal footing - is defeated. He emphasised that this is a standard provision in private limited company articles and that its purpose is well understood. If a shareholder could be registered but was not bound, uncertainty would be introduced into the internal management of a company’s affairs.[38]In my judgment, article 12(2) clearly requires a deed that is legally effective to bind the transferee before the directors have power to register them. It is true that the article itself does not contemplate a multi-partite deed of novation: what its wording appears to contemplate is a unilateral deed executed by the transferee. That is, presumably, why there is repeated emphasis on execution and delivery of a deed. Nevertheless, the directors’ powers are limited to ensure that only Permitted Transferees become registered, and only then if the transferee is bound by terms that bind the other shareholders, or if the shareholders unanimously agree otherwise. I agree that the purpose would be defeated if a transferee was able to deliver a deed that, for whatever reason, turned out to be invalid and yet the directors could register that person as a member.[39]It is correct that the directors have discretion (under the articles) as to the form of the deed – but they could not exercise that discretion by prescribing a form of deed that was ineffective, for whatever reason, and then register the transferee notwithstanding. That would be to confer on themselves a power to register that the articles do not intend them to have. Their power to specify a particular form of deed must be limited to a form that can give effect to the purpose of the article, not a form that defeats that purpose. The requirement for a multi-partite deed of novation was a proper exercise of their discretion because that is what the SHA (which binds JTL) requires. But the directors could not register Uconinvest until the deed had become effective. That does not mean that it needed to be legally effective immediately upon delivery by Uconinvest: subsequent execution by QAZ42 prior to registration would have sufficed.

Issue 2: Onus of proof of prior consent of shareholders

[40]That means that on the undisputed facts the directors of JTL did not have power to register Uconinvest unless all the A Ordinary shareholders gave their prior consent to registration. This is the third fact that was identified at the hearing on 8 October 2024 and which was not agreed. The second issue is where the burden of proof lies, as regards whether QAZ42 did in fact consent to the registration of Uconinvest before 7 March 2023.[41]Mr Chaisty submitted that, as a result of the Order of 8 October 2024, the burden clearly falls on JTL to prove that QAZ42 did not give its consent. It was one of the 3 facts that JTL identified at that hearing as the basis of its legal case. That is reflected in paragraph 11 of the Order. Further, Mr Chaisty pointed out that it would have been easy for JTL to prove, if it was the case, that QAZ42 did not give its consent: its own directors were in contact with QAZ42 or its agents, and the consent in question, if given, would either have been given to them, or any employee of JTL, or be in writing. But JTL called no evidence.[42]Mr Singla argued that the burden falls on Uconinvest because the relevant words of the article are in the nature of an exception to the requirement for a deed of adherence. It is well-established, he said, that where an exception to liability exists, the burden falls on the party seeking to establish the exception, not on the party who relies on the remainder of the provision to establish liability. So, he said, Uconinvest has to prove that QAZ42 did consent, if it was relying on that exception to justify the directors’ exercise of their power to register it.[43]In any event, Mr Singla showed me the correspondence that was disclosed that relates to the need for QAZ42’s consent and the attempts to persuade it to execute the deed of adherence. QAZ42 did not respond to correspondence.[44]It is clear from the documents that JTL’s directors knew that they had a potential problem with QAZ42 executing the deed – careful consideration was given by JTL’s lawyers, Cohen & Gresser, to whether the need for QAZ42’s participation could be avoided; but the conclusion was that it could not be. Mr Wahid told Mr Orynbayev, somewhat cryptically on 28 December 2022:
“we need to be careful vis-à-vis G42. I had a discussion with them yesterday”
. The impression given by the totality of the correspondence disclosed is that QAZ42 were just not cooperating. Uconinvest raised questions about the completeness of JTL’s disclosure relating to this issue, but this was not a point that was raised and pursued prior to the trial, only in its skeleton argument as a forensic point.[45]In substance rather than in form, what article 12(2) provides is that the directors must not register a transferee of a share, even a Permitted Transferee, unless either(a) the transferee has executed and delivered a deed agreeing to be bound, or(b) the A Ordinary shareholders agree that it may be registered without one. Alternative (b) is not in substance an exception to liability. The question of who bears the burden should in my view be determined by the nature of the claim, by which party is asserting what, and with regard to who in reality is able to bring evidence to bear on the point.[46]Where a shareholder has been registered by the company and the company itself then brings a claim to remove the shareholder, on the basis that the directors did not have power to register it, it should in principle be the company that bears the burden of proving that the directors did not have that power. It is JTL that is seeking to establish its right to a remedy. That remedy requires it to establish two negatives: that Uconinvest did not adhere to the SHA and that the A shareholders did not consent. That is reinforced by the way in which JTL explained on 8 October 2024 that it intended to argue its claim and the limited facts that it would rely on for that purpose.[47]Although, if the burden lies on JTL, it will involve JTL in proving a negative, namely that QAZ42 did not provide its consent, it is not the kind of negative fact that is difficult to prove. It does not depend on the knowledge of a third party. The relevant facts, namely whether QAZ42’s officers or agents told JTL’s officers or agents that they agreed to Uconinvest being registered without becoming bound by the SHA, are matters that are within the knowledge of JTL’s officers or agents. I was unable to understand Mr Singla’s assertion, in reply, that no witness from JTL could deal with the question of whether QAZ42 had given consent. JTL would know whether a request was made for consent (as opposed to execution of the deed of adherence) and it would know whether any reply was received, and if so what was said. These facts are, however, unlikely to be within the knowledge of Mr Orynbayev.[48]The burden therefore lies on JTL in this claim to prove that QAZ42 did not give its consent.

Issue 3: Did QAZ42 agree to the registration of Uconinvest?

[49]JTL did not call the evidence that one would have expected it to call. That may be because JTL did not want to risk exposing one of its directors to cross-examination, or it may be because it considered that the burden lay on Uconinvest to prove that QAZ42 had given its consent and it knew that Uconinvest would be unable to do so. Or it may be for both reasons.[50]It is clear that there are tactical manoeuvres going on in this litigation. I do not therefore feel able to infer, just because JTL has not called any evidence, that it was because JTL knows that QAZ42 had in fact consented. I must decide nevertheless whether JTL has proved that QAZ42 did not consent.[51]What the documents show is that Mr Wahid, a director of JTL, knew that there was a problem with getting QAZ42 to approve Uconinvest’s accession to the shareholder agreement. Why there was such a problem is unclear. It is not even clear whether QAZ42 was asked for its consent.[52]Mr Singla said that the documentary evidence establishes that QAZ42 was “passive”, and that therefore I should infer that it did not give its consent. It is evident from the disclosed documents that QAZ42 did not respond to JTL’s request. On 3 January 2023, JTL’s legal counsel noted that he had not heard from QAZ42 following distribution of the deed of adherence for signature, and that QAZ42 had not signed any shareholder resolution for 6 months. The fact that JTL chose to use the deed of adherence route, rather than ask for QAZ42’s consent, is probably because it wanted Uconinvest to be bound by the SHA.[53]In those circumstances, I consider it inherently likely that QAZ42 was not asked to consent to Uconinvest’s registration without adhering to the SHA. If it was asked, the evidence suggests that QAZ42 was not cooperating with JTL or Jysan, and would probably not have responded. If it was asked and responded, the most likely response, in the circumstances of its non-cooperation, would have been “no”. If it was asked and had replied “yes”, I consider that there would have been a documentary record of that that would have emerged, but there is none. For those reasons, I find that QAZ42 did not give its consent. There is sufficient material from which this can safely be inferred, on a balance of probabilities.

Section 40 Companies Act 2006

[54]On the basis of my conclusions so far, the registration of Uconinvest was in excess of the powers of JTL’s directors. The next question is whether JTL can rely on that excessive exercise to invalidate the registration. Although Mr Singla referred to the registration as being ultra vires, registration of a Permitted Transferee was not beyond the corporate capacity of JTL (see s.39 of the 2006 Act and article 5 of JTL’s articles of association) and was not ultra vires in that sense. The fact that the company itself is under a statutory duty to maintain a register of members does not turn exercise of powers into an issue of corporate capacity. The registration of Uconinvest was an act done by the directors in excess of the powers given to them by JTL’s constitution. (Whether it was known to be so by the directors at the time is a matter that I will address later, but it does not affect the question of vires.)[55]Uconinvest relies on s.40 of the 2006 Act for the proposition that JTL cannot rely as against it on the excessive exercise of the power in article 12(2).[56]S.40 is the indirect successor to section 9 of the European Communities Act 1972, which brought English company law into line with the First Council Directive on Company Law, 68/151/EEC. Article 9(2) of the Directive states:
“The limits on the powers of the organs of the company, arising under the statutes or from a decision of the competent organs, may never be relied on as against third parties, even if they have been disclosed.”
[57]The UK enactments did not use the words “third parties”, as the Directive did. They used instead the concept of a person dealing with a company in good faith, which was defined as meaning a person who in good faith is a party to a transaction or other act to which the company is a party. In time, questions of whether a director or shareholder of the company could be such a person arose for decision. It was held that a director and a shareholder could in some circumstances be such a person. I will refer to those decisions shortly, as they were relied on by Mr Singla.[58]The wording of s.40 of the 2006 Act is, however, slightly different from its predecessors, and it is that section that I must apply. So far as material, it states:
“(1) In favour of a person dealing with a company in good faith, the power of the directors to bind the company, or authorise others to do so, is deemed to be free of any limitation under the company's constitution. (2) For this purpose – (a) a person ‘deals with’ a company if he is a party to a transaction or other act to which the company is a party, (b) a person dealing with a company – (i) is not bound to inquire as to any limitation on the powers of the directors to bind the company or authorise others to do so, (ii) is presumed to have acted in good faith unless the contrary is proved, and (iii) he is not to be regarded as acting in bad faith by reason only of his knowing that an act is beyond the powers of the directors under the company's constitution. (3) The references above to limitations on the directors' powers under the company’s constitution include limitations deriving – (a) from a resolution of the company or of any class of shareholders, or (b) from any agreement between the members of the company or of any class of shareholders ………. (6) this section has effect subject to – section 41 (transactions with directors or their associates), and section 42 (companies that are charities).” (a) a person ‘deals with’ a company if he is a party to a transaction or other act to which the company is a party, (b) a person dealing with a company – (i) is not bound to inquire as to any limitation on the powers of the directors to bind the company or authorise others to do so, (ii) is presumed to have acted in good faith unless the contrary is proved, and (iii) he is not to be regarded as acting in bad faith by reason only of his knowing that an act is beyond the powers of the directors under the company's constitution. (a) from a resolution of the company or of any class of shareholders, or (b) from any agreement between the members of the company or of any class of shareholders section 41 (transactions with directors or their associates), and section 42 (companies that are charities).”
[59]Section 41 of the 2006 Act (“s.41”), which derives from section 322A of the Companies Act 1985 (itself inserted by the Companies Act 1989), now provides (so far as material): “(1) This section applies to a transaction if or to the extent that its validity depends on section 40 (power of directors deemed to be free of limitations under company’s constitution in favour of person dealing with company in good faith) (2) Where –(a) a company enters into such a transaction, and(b) the parties to the transaction include – (i) a director of the company or of its holding company, or (ii) a person connected with any such director, the transaction is voidable at the instance of the company. …… (6) Nothing in the preceding provisions of this section affects the rights of any party to the transaction not within subsection (2)(b)(i) or (ii). But the court may, on the application of the company or any such party, make an order affirming, severing or setting aside the transaction on such terms as appeared to the court to be just.” (7) In this section – (a) ‘transaction’ includes any act; ….” (i) a director of the company or of its holding company, or (ii) a person connected with any such director,[60]Uconinvest’s case is that it was a person dealing with JTL, as it was party to a share sale and purchase transaction to which JTL was the other party. On that basis, the directors’ powers to bind JTL in connection with the transaction are deemed to be free of the limitation in article 12, including the limitation on the power to register Uconinvest as a member. It is not disputed that Uconinvest was acting in good faith. If that argument is right, the basis of JTL’s claim for rectification falls away.[61]JTL disputes that s.40 applies in relation to the lack of authority of the directors to register Uconinvest. First, it contends that section 40 does not apply as between a company and a shareholder, as a shareholder is not a “third party” within the meaning of the Directive. Further, it is argued, on the basis of a case relating to a bonus share issue, that the sale of Uconinvest’s shares was value neutral, so far as JTL was concerned, and so it was not a “transaction or other act” within the meaning of s.40(2). These points are disputed by Uconinvest, which says that it was, at the time of the SPA, an outsider which was buying shares from JTL, not an insider dealing with other organs of the company in a way that did not affect the assets or liabilities of JTL.[62]Second, JTL says that registration of a transfer, which was the only act done in excess of the directors’ powers, is not a “transaction or other act” to which Uconinvest was a party, within the meaning of s.40(2), and so that section cannot apply to validate the registration. Uconinvest disputes that analysis and contends that registration was the final component of the SPA, which was a single transaction of sale and purchase of shares for Uconinvest to become a member of JTL, which must be considered as a whole.

Issue 1: Was Uconinvest a person dealing with JTL?

[63]Prior to the SPA, Uconinvest was not a shareholder of JTL, though Mr Orynbayev had an understanding with its directors that the B shares that he transferred to JTL in May 2022 would be returned to him at a later date. When the SPA was made, Uconinvest was an outsider ( a “third party” in the language of the Directive).[64]As from the date of the SPA, Uconinvest was beneficially entitled to the B shares, which were up to that point held in Treasury by JTL. Uconinvest had rights against JTL in relation to the shares akin to beneficial ownership of them, but it was not a statutory member of the company until it was registered on 7 March 2023 (s.112(2) of the 2006 Act).[65]There is no express exclusion of directors or shareholders in s.40. The only question is whether Uconinvest was a person dealing with JTL, as defined in that section. But there is a clear indication in s.41 of the 2006 Act that shareholders are not impliedly excluded from the reach of s.40.[66]Where s.40 applies because directors have exceeded their powers, s.41 makes the transaction (or act) voidable if it is made with a director or a connected person. Other provisions of s.41 regulate the rights and liabilities of the parties in those circumstances. Subsection (6) provides that the provisions of s.41 do not affect the rights of any other party to the transaction. That means that if a shareholder is also a party, their rights are unaffected.[67]Two points emerge from this. First, Parliament has legislated for the consequences of a transaction in excess of directors’ powers that is made with a director, but has not done so in relation to transactions of that kind made with a shareholder. That implies that shareholders are not to be treated differently from other persons, so far as s.40 is concerned. It is hard to imagine that Parliament intended a more severe outcome for a shareholder than for a director. Second, the terms of s.41(6) show that, on the contrary, shareholders’ rights are intended to be unaffected if the transaction or act is one to which s.40 applies, save to the extent that the court exercises its s.41(6) powers. It is too improbable a construction of ss.40 and 41 that s.40 applies to a transaction to the extent that a director is dealing with the company but not to the extent that a shareholder is.[68]As a matter of construction of the statutory provisions, I would therefore conclude that directors and shareholders are not excluded from the operation of s.40 because they are “insiders”. They are persons falling within it if they are parties in good faith to a transaction or other act to which the company is a party.[69]Urging me to reach a contrary conclusion, Mr Singla referred to the decisions in Smith v Henniker-Major & Co (a firm) [2003] EWCA Civ 762 (“Smith”); [2003] Ch 182, and EIC Services Ltd v Phipps [2003] EWHC 1507 (Ch); [2004] EWCA Civ 1069 (“Phipps”). He submitted that these decisions establish that the predecessor of s.40 did not apply in relation to dealings with shareholders qua shareholders, which is what was happening when JTL registered Uconinvest as a member.[70]Smith was a case where a director of a company assigned to himself a cause of action against the solicitor defendants. The defendants contended that the board meeting at which it was resolved to assign the cause of action was invalid and the director sought to rely on s.35A of the Companies Act 1985 to validate the assignment. The Court of Appeal held that the words “a person dealing with a company” were wide enough to include a director, but that in the circumstances the particular director could not rely on the section to turn an inquorate board meeting into a valid board meeting.[71]Of the judges in the majority, Carnwath LJ preferred to express no view about the operation of s.35A in favour of directors in other circumstances, though he accepted that the language of the statutory provisions was wide and did not impliedly exclude directors. Schiemann LJ considered that a director could not rely on s.35A in a case when they were the very person who had acted in breach of the company’s constitution, but otherwise there were no limits to who could be a person dealing with a company. Robert Walker LJ agreed that the section had wide application and did not impliedly exclude directors, but concluded that it could not apply where the act was a nullity rather than merely irregular.[72]This case therefore lends no support to the argument that shareholders are impliedly excluded from taking the benefit of s.40 because they are properly to be regarded as insiders rather than third parties.[73]Phipps concerned the validity of bonus shares issued by a company. Contrary to the company’s articles, no general meeting was held to approve the issue and allotment of the shares. The failure was not remedied under the Duomatic principle, nor was the issue of the shares void for mistake, and so Neuberger J had to consider whether s.35A prevented the company from relying on the invalidity as against the allottees. He held that there was no reason why s.35A should not apply to members of a company dealing with the company “certainly in connection with matters such as receiving shares, whether shares for which they pay, or bonus shares”.[74]On appeal, Peter Gibson LJ, with whom the other Lords Justices agreed, held that a shareholder receiving bonus shares was not a person dealing with the company:
“Having regard to the nature of a bonus issue (see paras 17 and 18 above) and the fact that it is an internal arrangement with no diminution or increase in the assets or liabilities of the company, with no change in the proportionate shareholdings and with no action required from any shareholders... I do not think that the shareholder is a person dealing with the company as a matter of ordinary language. The section contemplates a bilateral transaction between the company and the person dealing with the company or an act to which both are parties such as will bind the company only if [section 35A] applies and it will not apply if the person deals with the company other than in good faith. It would be very surprising if a bonus issue made by a single resolution applicable to all shareholders were to be rendered by the section binding in part but void in part depending on the circumstances of the individual shareholders. Nor do I agree with the judge that it matters not whether the shareholder receives a bonus issue or pays for his new shares. If a shareholder receives shares otherwise than by way of a bonus issue (for example, by a rights issue requiring payment of new consideration), then he would have to deal with the company, and the question would be whether a shareholder is within the intended reach of the section.”
[75]Peter Gibson LJ then went on to consider that question and said, obiter, that the term “third parties”, as used in the Directive, did not include members of the company; that Smith did not assist on the question whether a shareholder could be a person dealing with a company, and that s.322A did not assist either. However, the ratio of the decision is that the shareholders were not parties to the unilateral act of issuing and allotting bonus shares.[76]The ratio of Phipps provides little support to Mr Singla’s argument in this case. Uconinvest was an outsider dealing with JTL by acquiring B shares for cash, which was substantially less than the value of the shares. It did so by way of a bipartite SPA. The transaction increased the realised profits of JTL: s.731(2) of the 2006 Act.[77]I accept that the obiter dicta of Peter Gibson LJ provide support to Mr Singla, but I do not consider that these dicta should determine the true construction of ss.40 and 41 of the 2006 Act. Sections 39-42 of the 2006 Act, which are not identical with the predecessor provisions, are clearly intended to operate as a single, coherent and comprehensive code in relation to the capacity of a company and the powers of its directors to bind it, and do not leave a gap through which undefined and uncertain categories of “third party” or “insider” (neither of which terms is used in the statute) can fall.[78]Parliament has chosen to use the language of persons dealing with a company in good faith as the embodiment of the requirement of the Directive to give protection to “third parties”. The reasoning of the court in Smith explaining the breadth of the predecessor provisions, albeit in the context of dealings with directors, is part of the ratio of that decision, and is in my judgment preferable to the obiter observation in Phipps on the position of shareholders in general. In Phipps, no reference was made specifically to section 322A(7) of the Companies Act 1985, which is in similar terms to s.41(6) of the 2006 Act. It may be that some internal dealings between shareholders and the company can be characterised as outside the protection of s.40 because they are not transactions or acts to which the shareholders are a party. But that does not apply to a purchase of shares from the company for valuable consideration.[79]I therefore conclude that a shareholder is in no different position from a person with no existing relationship with a company, so far as the application of s.40 is concerned. The relevant questions are whether the shareholder was a party to a transaction or act, to which the company was also a party, and if so whether the shareholder was acting in good faith. Good faith is presumed unless the contrary is proved. The mere fact that a shareholder or another person is aware of a limitation on the power of the directors does not automatically mean that they are not acting in good faith: something further (though possibly not much further) is required: s.40(2). If a director is also a party to the transaction or act in question, the effect of the limitation in question is governed by s.41; but if not, s.40 alone applies. If the company is a charity, s.42 of the 2006 Act applies, which reduces the effect of s.40.[80]In any event, at the time when the SPA was made by Uconinvest and JTL, Uconinvest was not a shareholder; nor was Mr Orynbayev, if that is relevant. It was in the same position as any other company that was offered the chance to buy shares in JTL for money. It was dealing with JTL in good faith.

Issue 2: is the act of registration separable from the sale and purchase transaction?

[81]That conclusion leads to the second argument of Mr Singla, which is that the SPA transaction, if it does fall within s.40, should be regarded as distinct from the later act of registration. Although the SPA may be a transaction with a non-shareholder, or otherwise be a transaction within s.40, he submitted that the later act of registration was a separate, unilateral act by the directors of JTL, not an act to which Uconinvest was a party. Mr Singla pointed to a paragraph of the Points of Defence in which Uconinvest described it as an “internal management issue”. However, the same paragraph then pleads why purchasing the B shares, seeking to be registered and then being registered was dealing with JTL in good faith, so nothing turns on the description of the act of registration by Uconinvest in its statement of case.[82]Mr Singla submitted that the only act that was ultra vires was the registration of Uconinvest by the directors before the deed of adherence had legal effect. He said that therefore the court’s focus, in considering whether section 40 applies, should be on the act of registration alone. This was not, he said, a transaction or act within the meaning of section 40 because Uconinvest was not a party to the act of registration: like the issue of the bonus shares in Phipps, it was a unilateral act of the directors.[83]The relevant question seems to me to be whether the registration of Uconinvest is regarded as part of the transaction between it and JTL or whether it is a discrete act that is performed by JTL. If it is a discrete act of JTL for these purposes, then the position appears to be governed by the decision in Phipps, because entering the name of Uconinvest in JTL’s register of members is an act of JTL alone, not an act to which Uconinvest is a party. If on the other hand, that act was part of the larger transaction whereby Uconinvest bought shares and became a member of JTL, it was a step in a bipartite transaction and the section should apply.[84]The relevant facts are the following.[85]On 28 December 2022, Mr Bronheim of Cohen & Gresser told a corporate manager at Jysan, Mr Wahid and Mr Orynbayev, by email, that approval would be needed for Mr Orynbayev or his corporate vehicle to join the SHA. Mr Orynbayev pointed out in response that QAZ42 could not block the transaction. Mr Bronheim responded reminding the same recipients that entry into the SHA was required, otherwise the board of JTL was not supposed to approve the new shareholder.[86]On 29 December 2022, pursuant to the advice given by Cohen & Gresser, JTL’s board made formal resolutions to enter into the SPA and resolved that its directors were authorised (among other things) to:• “agree and execute all other documents as may be required in order to implement the Agenda as resolved herein or the Transactions ….• do all such acts and things as may be necessary or desirable to give effect to the Transactions• [and] that all necessary and appropriate entries in connection with the Transactions be made in the books and registers of [JTL] and the necessary forms and documents be filed at Companies House”. (clauses 4(c)(iii) and (v) of the board resolution) The “Agenda” as defined was the matters to which the written resolutions related, and the “Transactions” as defined were the transactions contemplated by the SPA, including the sale by JTL of the B shares pursuant to the SPA.[87]These resolutions clearly contemplate that JTL would give effect to the transfer of shares by registering Uconinvest as a member and holder of the B shares. As noted below, a copy of the resolution was provided to Uconinvest on completion of the share sale.[88]The SPA was signed on the same date. By its terms, 12,255,099 B shares were sold to Uconinvest at par (purchase price £122,550.99). The following terms are material: i) Clause 4.1 made the purchase subject to obtaining the authority of the shareholders of JTL; ii) Clause 4.6 made any stamp duty on any document necessary to register the title of the shares a liability of Uconinvest as buyer; iii) Clause 5.1.2 and 5.1.3 contain warranties by JTL that it had full corporate power and authority to execute and deliver the SPA and to consummate the transactions contemplated by it, and that it had taken all actions required by law and its articles of association to authorise the making of the SPA and to consummate all transactions contemplated by it; iv) By Part 1 of Schedule 2 to the SPA, JTL was obliged at completion to deliver to Uconinvest a copy of the resolution authorising the execution of the SPA, stock transfer forms duly completed in favour of Uconinvest, and share certificates. In context, consummation of the Transactions includes registering Uconinvest as holder of the B shares.[89]The SPA does not include a term requiring Uconinvest to execute a deed of adherence, though the SHA required JTL to do so. This had been clarified by Mr Bronheim the previous day and was understood by all sides. The SPA does however contain a term relating to the registration of Uconinvest’s title to the B shares.[90]On 30 December 2022, an ordinary resolution of the members of JTL was passed approving the sale of the B shares to Uconinvest. It was passed upon being signed on behalf of Jysan, as the majority shareholder; QAZ42 did not apparently sign the resolution.[91]The deed of adherence was sent to Mr Orynbayev for execution by Jysan’s legal counsel on 3 January 2023 and was duly executed and delivered to JTL.[92]The terms of the SPA and the board resolution demonstrate that Uconinvest was to acquire the B shares from JTL in its own name, as beneficial owner of the shares, and be registered as a member holding those shares. JTL had sold the shares to Uconinvest from Treasury and could not remain registered as owner of the shares. The cash consideration, being equal to the sum paid for the shares in 2022, fell to be treated as profits of JTL. The purpose of requiring the deed of adherence to be executed by Uconinvest was so that the directors of JTL could validly register Uconinvest. The deed of adherence was not needed under JTL’s articles for it to be a Permitted Transferee; only for it to be registered.[93]Seen in this light, the right interpretation of the transaction to which Uconinvest and JTL were parties is that it included the registration of Uconinvest as a member of JTL with a holding of (initially) 12,255,099 shares. Registration was not a discrete act, as it would have been had Uconinvest purchased shares from QAZ42 and delivered the stock transfer form and share certificate to JTL for registration. JTL itself sold Uconinvest the B shares so that it would have registered title to them.[94]For this reason, in my judgment, Uconinvest was dealing with JTL, within the meaning of s.40, when JTL registered it as a member. Under s.40, a person can be dealing with a company in good faith where the otherwise invalid act is only part of the transaction. If that were not so, any unilateral step that was part of a larger transaction could fall outside the reach of the section. The identity of the transaction or act is of course a question of fact in each case.[95]Accordingly, JTL cannot rely as against Uconinvest on the excessive exercise of directors’ powers, and the claim for rectification of the register fails for that reason. I will accordingly dismiss the Part 8 claim.

Alternative basis of decision

[96]In case the matter goes further, I will give my reasons for the conclusion that I would have reached if I had decided that s.40 does not apply in favour of Uconinvest.[97]In those circumstances, as between JTL and Uconinvest the registration is liable to be set aside (unless its invalidity was remedied). JTL’s case is that, in those circumstances, the court cannot exercise its discretion to give the registration a validity that does not exist.[98]Although JTL accepts that the statutory jurisdiction is a discretionary one (see Re Sussex Brick Company [1904] 1 Ch 598, per Sterling LJ at 608-609, and Re Piccadilly Radio (1989) 5 BCC 692 (“Piccadilly Radio”), per Millett J at 703), it submits that the court could not properly exercise the discretion in Uconinvest’s favour if the registration is ultra vires.[99]On exercise of discretion, JTL argued that it is clearly wrong that Uconinvest can continue to take the benefit of being a registered member without being made to submit to the burden of the SHA; and, secondly, that Uconinvest consciously decided for its own advantage to dispute the validity of the deed of adherence, thereby avoiding a stay in favour of arbitration. Uconinvest should therefore be visited with the consequences of that decision, because only a shareholder that has adhered to the SHA is entitled to be registered.[100]There are, properly analysed, two separate questions here, which, as a result of the matters agreed at the 8 October 2024 hearing, require to be dealt with differently.[101]The first is whether discretionary factors, such as conduct, fairness, waiver and estoppel, are legally irrelevant to the exercise of the discretion. JTL contends that they are because the voidness of the act of registration requires the register to be rectified. That question is to be determined to the full trial standard of proof, i.e. it is not sufficient for Uconinvest to establish that there is a real prospect of an argument of relevance succeeding at trial. This is the trial.[102]The second, if these discretionary factors can have any relevance, is whether (by analogy with summary judgment) there is a real prospect of an unfettered discretion being exercised in favour of Uconinvest. The reason why that question is being dealt with differently is that JTL accepted, in the 8 October 2024 hearing, that its claim fails if there is a properly arguable case on the facts (i.e. a case with a realistic, not fanciful, prospect of success) that discretion could be exercised in favour of Uconinvest.[103]On the first question, JTL argued that because registration of Uconinvest was outside the capacity of JTL, no estoppel or waiver can justify Uconinvest remaining registered. A company, JTL asserted, cannot be estopped from maintaining that a purported act was ultra vires. If it was ultra vires, the court must act so as to reflect the absence of capacity on the part of JTL to register Uconinvest.[104]In support of this argument, Mr Singla referred to well-known cases (Re Home and Foreign Investment and Agency Company Ltd [1912] 1 Ch 72; Rolled Steel Ltd v British Steel Corporation [1986] Ch 246 (“Rolled Steel”)), an extract from a textbook and another extract from Halsbury’s Laws for the proposition that the doctrine of estoppel cannot operate so as to oblige a company to do something that is beyond its powers under its constitution. This is not disputed. However, these authorities refer to matters beyond the corporate capacity of a company, not matters done in excess of directors’ powers to do them, as Mr Singla’s citation from Slade LJ’s judgment in Rolled Steel makes clear:
“... if an act is beyond the corporate capacity of a company it is clear that it cannot be ratified. As against the company itself ‘an ultra vires agreement cannot become intra vires by means of estoppel, lapse of time, ratification, acquiescence, or delay’: York Corporation v Henry Leatham and Sons Ltd [1924] 1 Ch 557, 573 per Russell J. However, the clear general principle is that any act that falls within the corporate capacity of a company will bind it if it is done with the unanimous consents of all the shareholders or is subsequently ratified by such consents.”
[105]This is a reference to ultra vires in its meaning (in company law) of beyond the capacity of a company. It was Rolled Steel itself that stressed the importance of keeping separate questions of corporate capacity and questions of irregularity of exercise of powers by persons acting on behalf of a company.[106]JTL’s directors’ failure to obtain a legally effective deed of adherence is clearly in the latter category: the company had power (indeed a duty) to maintain a register of members and enter shareholders on the register, but the articles limit the directors’ exercise of their powers. They were required not to register a Permitted Transferee until a (valid and effective) deed of adherence had been executed and delivered to JTL. A deed was executed and delivered by Uconinvest, but it did not have legal effect because another party did not execute it.[107]The registration was not therefore invalid because the company had no capacity to register members; it was invalid (subject to s.40 or any ratification) because the directors exercised their powers prematurely: once QAZ42 had executed the deed, registration would have been valid. The fact that, under article 12(2) itself, the directors had power to register Uconinvest if all the shareholders had agreed demonstrates that it is not a matter of corporate capacity, even if s.39 of the 2006 Act had not abolished the company’s ability to rely on absence of corporate capacity.[108]The basis asserted by JTL for saying that discretion to refuse rectification could never properly be exercised in these circumstances is therefore not established.[109]The true analysis is that the registration is liable to be set aside, because it was in excess of the directors’ powers, but the deficiency could be remedied. It could be remedied by ratification by the members, or by JTL’s shareholders conducting themselves (with knowledge of the relevant facts) so as to make it inequitable for them to deny that they approved the registration: per Neuberger J in Phipps at [122]. (There is no suggestion in this case that Uconinvest can rely on ostensible authority.) For that reason, facts relating to knowledge, estoppel, agreement or acquiescence are potentially relevant.[110]Further, the facts of Piccadilly Radio,though very different from the facts of this case, demonstrate that there may be cases where the application to rectify the register, though technically justified, is nevertheless so unmeritorious in reality that the court may refuse it.[111]When it came to it, Mr Chaisty did not seek to develop his argument that JTL or its directors were estopped from relying on the excessive exercise of the power to register. He said that the facts that arguably give rise to estoppel, or waiver, are relevant to the exercise of discretion, and at least arguably justify exercising that discretion in favour of Uconinvest.[112]On the question whether there is a properly arguable case that discretion could be exercised to refuse rectification, Uconinvest relies on various facts: i) Rectification is being sought by the seller of the shares, contrary to the terms of its bargain with Uconinvest – JTL warranted that it had full power to consummate the Transactions and that it had power to take, and had taken, all necessary steps to do so. ii) The only other current shareholder, Jysan, consented to Uconinvest’s purchase (and by implication, its registration). iii) Uconinvest did everything that JTL required of it as regards the deed of adherence, and the only reason why registration was in excess of powers was that JTL failed to procure the execution of the deed by QAZ42. iv) JTL and Jysan executed a further deed of adherence on 26 January 2023, upon Uconinvest selling half its B shares to Mr Wahid’s company, Magellan Investments Holdings Limited (“Magellan”). v) The sale to Magellan enabled Mr Wahid to sell Magellan’s shares to a Mr Yessenov for a profit of about US$15 million, with that sale facilitating a further settlement of disputes between JTL, Jysan and the Republic of Kazakhstan. vi) Uconinvest believed that the deed of adherence was effective, based on legal advice from Cohen & Gresser that was shared with it, its own execution and delivery of the deed of adherence, and the fact that JTL did not tell it that QAZ42 had not executed the deed. vii) Its belief was reinforced by the request made by JTL to execute the second deed of adherence by Magellan, which Uconinvest did as a continuing shareholder on 26 January 2023. viii) Magellan and Uconinvest were then registered as shareholders on the same date, 7 March 2023.[113]Uconinvest argues that there was either a common understanding between it and JTL that the deed of adherence was valid, which was acted upon to Uconinvest’s disadvantage – by selling half its shares to Magellan at par, far below their true value – or (if there was no common understanding) JTL and Jysan knew that both deeds of adherence were invalid, because QAZ42 had not executed it, but nevertheless chose to register both Uconinvest and Magellan as members. Uconinvest does not accept that that registration was a mistake. Mr Chaisty pointed out that, despite avowed extensive review of documents by JTL’s lawyers, there have been no documents disclosed to show what happened between JTL, its directors and Jysan (and Jysan’s owners) between early January 2023 and 7 March 2023. As he put it, something must have been discussed. JTL has chosen to call no evidence about what happened, or to say that registration was a mistake because the directors believed that the deeds of adherence were valid.[114]Further, Uconinvest contends that the reason that JTL seeks rectification is mistaken: i) If rectification were ordered, Uconinvest would still beneficially own the B shares, as there is no ability for JTL to set aside or treat as invalid the SPA or the beneficial ownership of Uconinvest, which was valid. JTL would therefore be required to act in accordance with Uconinvest’s instructions in relation to the B shares. ii) The attempt to undermine the status of Uconinvest in the s.994 Petition will not be achieved in any event, as s.994(2) provides that – “The provisions of this Part apply to a person who is not a member of a company but to whom shares in the company have been transferred or transmitted by operation of law as they apply to a member of a company.”[115]Mr Singla’s principal points in favour of rectification are those identified in [99] above, namely that Uconinvest is not, but should be, bound by the SHA, if it is to be a member of JTL; and, having taken advantage of the fact that it is not bound, should not be allowed to have it both ways by remaining a member. In addition, he submitted that the argument that Uconinvest acted to its detriment on an assumed understanding that the deed of adherence was valid was flawed, as Uconinvest sold the shares at the price it paid for them, which was more than they were worth if it had been known that Uconinvest could not properly be registered.[116]It is helpful, in assessing whether there is a proper argument for exercising discretion in favour of Uconinvest, to put to one side, initially, the benefit that Uconinvest obtained in the arbitration claim by relying on the fact that it is not bound by the SHA. Apart from that matter, there is a realistic argument, perhaps even a strong case, for refusing rectification, in the exercise of discretion. It was JTL that sold Uconinvest the shares and asked Uconinvest to execute a multilateral deed of adherence; Uconinvest did what was required of it; and JTL did not achieve what it warranted that it had power to achieve. Registration was obviously (subject to compliance by Uconinvest) part of what Uconinvest was buying and what JTL warranted that it could deliver.[117]I am doubtful whether there is a realistic case of estoppel against JTL, but there is a real question about whether Jysan and JTL’s directors approved the registration of Uconinvest knowing that the deed of adherence had not been executed by QAZ42 and so was not in compliance with the requirements of the articles. Jysan later became the only other shareholder of JTL, when QAZ42 sold its holding. That gives rise to a realistic (not fanciful) argument that JTL (controlled by Jysan) should not now be able to go behind its decision.[118]Further, it is unclear what benefit JTL obtains by removing Uconinvest from the register of its members. It would not secure the advantage of the private arbitration that JTL desires. Further, after rectification, Uconinvest would still have the same ownership rights in equity, and could require JTL to deal with its shares as it directs. The fact that Uconinvest might have greater difficulty selling the B shares to a third party does not give JTL a commensurate advantage, as Uconinvest is now petitioning to be bought out of JTL at fair value. Removal from the register of members will not remove its status as petitioner.[119]The real question on discretion, therefore, is whether what happened in the arbitration claim, when Uconinvest denied being bound by the SHA and obtained an advantage that a member of JTL should not enjoy, outweighs these other factors, so that it is not properly arguable that rectification should be refused in the exercise of discretion. I remarked during the hearing and in the 2024 Judgment that there was an uncomfortable tension between Uconinvest’s reliance on its membership and its denial of being bound by the SHA.[120]Although I acknowledge the force of the argument that Uconinvest should not be allowed to have the best of both worlds, I do not consider that it means that discretion can only properly be exercised one way. The advantage that Uconinvest obtained and exploited was as a result of JTL’s failure to have the deed of adherence properly executed, not as a result of being registered as a member. There remains a question as to whether Jysan itself consented and JTL registered with knowledge of the deficiency, for other reasons, possibly the benefit that Mr Wahid and Magellan were going to obtain.[121]Even if Jysan did not knowingly consent, Uconinvest has only a small holding and is intent on being bought out. Its membership free from the obligations of the SHA is therefore not as significant as it might otherwise be, save that it is not bound to arbitrate the primary complaint in the Unfair Prejudice Petition. But, again, the reason for that is because JTL failed to obtain QAZ42’s execution of the deed of adherence. The SHA is in any event less significant now that QAZ42 is no longer a member of JTL: many of its terms are concerned with regulating QAZ42’s status and interests.[122]Had I decided the s.40 issue in favour of JTL, therefore, I would have held that I was not required to exercise the s.125 discretion in its favour, and, in the circumstances explained in [100]–[102] above, that there was a realistic as opposed to fanciful prospect of rectification being refused, and so JTL has failed to establish its case in any event.