Game Over?

“Some people think football is a matter of life and death. I am very disappointed with that attitude. I can assure you, it’s much, much more serious than that.”
(Bill Shankly)

Blackpool Football Club has been through a rollercoaster ride over the last 10 years. Just ask our Employment Partner, Tom Scaife, a devout Blackpool fan. He’ll happily talk about it at (too much) length for as long as he can get away with…..

Matters at the club took another turn on Monday (6 November), when the Companies Court handed down its judgment in a long-running shareholder dispute. The long-time owners of the club, Owen and Karl Oyston (together with a company under their control), were ordered to buy out minority shareholder VB Football Assets (a company owned by Latvian Valeri Belokon). The case was brought by Belokon as an unfair prejudice petition on the back of Blackpool’s financial windfall from a season in the Premier League. Major disagreements arose as to the running of the club and, in particular, the removal of money from the football club without Belokon’s consent to his detriment as a minority shareholder.

VB Football Assets v Blackpool Football Club

In 2006, Latvian millionaire Valeri Belokon invested about £4.5m into Blackpool FC. The club was owned and controlled by Owen Oyston (or a company in his control). Original discussions in relation to the investment centred on Belokon having an equal shareholding with Oyston but this would have resulted in adverse tax consequences for the club and the Oyston group. Under revised written agreements, the investment became £1.7m for 20% of the shares with the balance being paid as loans/gifts. The court found that a gentleman’s agreement had been reached that each side would have ‘parity’ in the fullness of time (i.e. when the loans could be converted into equity without the tax consequences) and that in the meantime Belokon would be treated equally as joint owner, a point disputed by the Oystons.

The arrangement worked passably well until 2010 when Blackpool FC were promoted to the Premier League resulting in a huge increase in revenue, bringing in the region of £96m additional revenue in television money and Premier League payments, not accounting for increases in attendance.

The court found that at this point the Oystons set about removing money improperly from the club, by way of purported director’s remuneration or unsecured intra-group loans to other Oyston companies or Owen Oyston, whilst also excluding Belokon from management. Ordinarily, such intra-group transfers would be perfectly legitimate; however, the evidence indicated that this was done without recourse to Belokon and despite the written agreements between the parties prohibiting such transfers.

Meanwhile, Blackpool dropped from the Premier League to League 2 (the bottom division in the League), with fans protesting against the Oyston’s stewardship of the club, lack of investment in the team or facilities and the payments made to other group companies.

Belokon’s company brought a claim in the High Court for unfair prejudice, claiming that VB football Assets should be considered an equal shareholder in the club but that in any event VB’s interests had been unfairly prejudiced by the actions of the Oystons in transferring money out of the club to their other group companies without consent and without him receiving the same sums.


The Judge found Belokon and his team to be more credible witnesses to events than the Oystons and their team. The Oystons argued that discussions had moved on in 2006 and when Belokon’s investment deal was done, it was only ever for 20% of the shares in the club. The judge found that the arrangements made no commercial sense if this were true. Not only were the loans interest free but repayment conditions were not clear. The judge found the ‘absurdly favourable terms’ of the loans implausible and concluded that these loans only made sense as part of a wider agreement which existed over and beyond what had been put down in writing. He therefore found that “legally” VB Football Assets only owned 20% of the shares in the club but that an oral ‘gentleman’s agreement’ had been entered into whereby VB Football Assets had parity. The court therefore found that VB was equitably an equal shareholder in the club.

In addition, the Judge found that whilst the monies paid out of the club to the Oyston companies were loans, their terms and the background documents showed them to be disguised dividends, paid without Belokon’s consent. The judge therefore found that there had been unfair prejudice.

The judge then had to grapple with making an appropriate award.  He considered ordering the company to be reconstituted to reflect the correct shareholding balance; however, Belokon was recently deemed not to be fit and proper to hold more than a 30% shareholding in a football club under Football League rules due to conviction for money laundering in Kyrgyzstan. The judge therefore decided that the most equitable remedy was to order the Oystons (and/or their company) to buy Belokon out of his equal shareholding for the sum of £31.27m plus costs and interest. The award comprised the £4.5m which Belokon invested initially plus £26.77m, being an amount equivalent to the sum which the Judge found had been paid to the Oystons as disguised dividends. The Judge reasoned that if the Oyston’s were entitled to such sums, so is Belokon.

It is understood that the Oystons are considering an appeal to the Court of Appeal.


A minority shareholder in a company can bring a claim for unfair prejudice if the affairs of the company are being conducted (or are going to be conducted) in a manner that is unfairly prejudicial to their interests as a shareholder.  Common grounds of unfair prejudice include a failure properly to pay dividends, a diversion of corporate assets/opportunities to a competing business, exclusion from management of the shareholder, breach of fiduciary duty by the minority’s co-shareholder(s) and breach of the company’s articles of association/the shareholders’ agreement. If unfair prejudice can be established, the court has a wide discretion to grant relief.  The most common order is an order for the purchase of the minority’s shares at fair value but other orders can be made including an order regulating the future affairs of the company or an order requiring amendments to the articles of association. Unfair prejudice cases can be notoriously expensive to defend, so controlling shareholder/directors need to be mindful of the interests of minorities when making decisions.

The case also highlights the risks associated with ‘gentleman’s agreements’ concerning how a company is to be run. In this case, it was found that the agreement did not give rise to a “legal” equal shareholding but that equitably Belokon was entitled to be treated as an equal shareholder. Verbal agreements are as enforceable as a written contract if a court can establish the terms of the agreement from contemporaneous evidence. They are risky and parties are well advised to carefully document agreements, and make clear that previous negotiations/agreements cannot be relied upon, otherwise there is a real risk of significant legal costs being incurred down the line.

If you have any queries relating to commercial agreements, shareholder disputes or any other litigation queries please contact Elizabeth Black or Imogen Duck in the litigation team on 01228 552600 or 01524 548494.

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