Paul Lunt on the LFC shares dilemma

Mar 11 2008 by Vicky Anderson, Liverpool Daily Post

THE impasse that has arisen in the battle for ownership of Liverpool Football Club highlights the unattractiveness of being a minority shareholder.

Tom Hicks and DIC have been in talks about the future ownership and control of Liverpool Football Club, and it seems that both are willing to consider the possibility of some future role for the other.

Reports have quoted Tom Hicks as having offered DIC a “10% to 15% participation”. However, the sticking point seems to be the fact that neither party is willing to accept a role as a minority shareholder; each of them will only consider a controlling stake.

This is not surprising. The strict rights of a shareholder holding less than 50% of the shares in a private limited company are generally fairly limited. For example, there is no automatic right to a seat on the board, no right to demand a day-to-day role in the running of the business and only limited rights to see the details of the financial position of the business.

However, the issue between Hicks and DIC is not necessarily just about the amount of shares that DIC wants to acquire. The real issue is likely to be one of decision-making power and the degree of involvement in the running of the business.

If DIC and Hicks really are considering some form of co-ownership, in practice it would be inconceivable that they would do that without also agreeing enhanced rights for each party – rights that are over and above those that the law generally provides a minority shareholder.

PAUL LUNT is litigation partner at Brabners Chaffe Street and a specialist in shareholder rights.