Claim No: CR-2024-004856 - [2025] EWHC 2304 (Ch)

The position following the undertaking given in the course of the hearing

During the hearing the position changed somewhat. Mr Ipek has offered to provide an undertaking to the court. After the hearing it was clarified that the undertaking he was prepared to offer would be in the following terms:

“Mr Ipek agrees to accept that the directors of Koza Altin are authorised to act on Koza Altin’s behalf in all matters in relation to Koza that Koza Altin can lawfully perform as a shareholder of Koza.

The undertaking:

1.

is given without prejudice to the parties’ rights and obligations in terms of the orders that make up the Interim Regime

2.

is given without prejudice to the pending proceedings in the Constitutional Court of the Republic of Türkiye, and any subsequent proceedings in the European Court of Human Rights, challenging the confiscation of Koza Altin, and any relief that may be granted in those proceedings, including in respect of the restoration of any confiscated shares; and

3.

does not apply to litigation, claims, or steps taken or purportedly taken in terms of court orders in Türkiye.

For the avoidance of doubt, nothing in this undertaking waives Mr Ipek’s rights as Director or ‘A’ shareholder of Koza Ltd, nor his rights in any other jurisdiction or in matters unrelated to Koza Ltd.”

Mr Ipek’s solicitors have confirmed in correspondence that the reference to “lawful” performance is not intended to provide a back door to reopening the Authority Claim but instead was reserving a right to argue that a particular resolution may be unlawful or beyond the power of ordinary shareholder on other grounds (and I discuss below some of the possible grounds that were raised in oral submissions).

This undertaking significantly strengthens the argument that Koza Altin retains ultimate control as it can pass a resolution that would be binding on Mr Ipek. For example, Koza Altin has concerns about how much money is being spent every month (around £25,000 a month plus VAT) on Whitehall which is providing consultancy, apparently mainly in the area of public relations and networking. I see no reason why Koza Altin could not pass a resolution under Article 4 to forbid that expenditure.

The core of the dispute is that Koza Altin has no confidence that Mr Ipek is working in the interests of its shareholder and wishes to exit from its investments in the stalled goldmining projects in which Koza Ltd has invested, whilst Mr Ipek wishes to remain in place and to continue with these projects. Koza Altin (unless and until the English Company Law Claim is resolved in its favour) cannot remove Mr Ipek as director against his will, but I see no reason why Koza Altin could not bring about an exit from the stalled goldmining projects and the return to it of its capital by special resolutions under Article 4.

It seems to me that Koza Altin could pass resolutions requiring the director to sell the interests in the projects, not to spend the proceeds on anything else but to distribute any profits by way of dividend and to propose a reduction in capital (which Koza Altin could approve) to return any remaining capital after paying creditors (and reserving £1 so as to be able to meet the distribution due to the A ordinary shareholder on a winding up). I will call this theoretical suite of resolutions the “postulated wind-down resolutions”.

If there is no bar on Koza Altin restricting the spending of Koza Ltd and passing the postulated wind-down resolutions, and these would be complied with by Mr Ipek, then it is difficult to see that Koza Altin does not have ultimate control, and also difficult to see why a winding-up is necessary.

I put the postulated wind-down resolutions to Mr Sheehan to see if he agreed that this was a possible outcome, if Koza Altin wished to deal with things this way.

He was unwilling to concede that it was necessarily within the powers of a shareholder resolution. He regarded the interplay of shareholder powers and director powers to be a complex one. He acknowledged that the starting point was that shareholders have a power under Article 4 to give directors instructions, and that directors have a duty to comply with those instructions, but considered that it is difficult to say how such a duty interacts with directors' other duties and with shareholders' duties.

I consider that he was making heavy weather of the point.

As I understand it, Mr Sheehan was making two arguments, one based on directors’ duties and one based on the limitation on shareholders’ powers to pass resolutions.

The first was based on principles discussed in the decision in Hikari Miso v Knibbs [2023] EWHC 1340 (Ch) at [132]-[133] (“HikariMiso”). This case did not concern a shareholder direction under Article 4 (or any similar article), but rather considered the effect of a shareholders’ resolution under a shareholders’ agreement providing approval to something that was a matter reserved to shareholders under that agreement. Mr Sheehan drew my attention to that judgment at [154] where the judge said:

“154.

I accept that the good faith and conflicts duties cannot be abrogated entirely: they form part of the irreducible core of a fiduciary’s duties to his principal. However, the scope of their operation can be limited, sometimes dramatically so.”

The point being made here was that, where shareholders limit the scope of operation of the company (for example requiring it only to invest in certain areas) this affects the fiduciary duties of a director to act in good faith in the interests of the principal to pursuing actions within the scope of that endeavour. It would be a breach of duty for the fiduciary to act outside that scope. Obviously, a director would still have fiduciary duties within that scope.

I think Mr Sheehan was asking me to extrapolate from this decision a principle that would apply in the different circumstances of a direction given under Article 4, to say that even in the case of such a direction the directors are not absolved from their fiduciary duties, and therefore could refuse to obey that direction if they considered that the direction clashed with their fiduciary duties.

Mr Sheehan expanded his point by reference to Re Southern Counties Fresh Foods Ltd [2008] EWHC 2810 (Ch) where, at [64], Warren J, in the context of considering the position of a nominee director representing one of the shareholders, agreed that the duties of directors could be attenuated by unanimous agreement of the shareholders but considered that:

“The extent to which the shareholders could effectively agree that a particular nominee director could act in a way which he, and the rest of the board, saw to be positively against the interests of the company must be open to question”;

and, at [67](e)

“… it is doubtful whether, as a matter of English law, it is possible to release a director from his general duty to act in the best interests of the company”;

however, at [67](g)

“… I see no reason in principle why in relation to specific areas of interest, a director should not be released from his fiduciary duty to give his best independent judgment to the company”;

and at [68]:

“But whatever can be said as a matter of generality, I consider that the extent of the duties of a director in such a situation are very much fact-specific. The general duty is clear; the difficult question is the extent to which the duty is qualified. That qualification will depend critically on the context of the relationship and the particular action which is said to constitute a breach of duty.”

In arguing this point, Mr Sheehan particularly had in mind the resolution that had been passed by Koza Altin requiring Koza Ltd to enter into the EPA. The EPA mandated the sale of Koza Ltd’s largest asset on terms such that it was uncertain whether the initial cash consideration would come at all to Koza Ltd and it was clear that the future deferred consideration, in the form of potential future royalties would not come to Koza Ltd and would instead come directly to Koza Altin.

In this context, I can see Mr Sheehan’s point. It is difficult to see how it could be in the interests of the Company to sell its major asset on terms that the consideration, or a substantial part of it, would not come to the Company. The arrangement might also would be unlawful in that it would involve an effective distribution to the shareholder that was not properly sanctioned as a lawful dividend or lawful return of capital.

Mr Sheehan refused to speculate on whether it would also be open to Mr Ipek to claim that it would be a breach of directors’ duties if he were to be faced with resolutions along the lines of the postulated wind-down resolutions.

When I pressed him on the question of how it might be proper for Mr Ipek to fail to comply with such a resolution he considered that the matter would need to be considered on its facts, but suggested that Mr Ipek might possibly have arguments either:

I put it to Mr Sheehan that what he appeared to be saying is that if Mr. Ipek was faced with a resolution that he does not agree with and he does not think in the best interests of the Company, he may refuse to deal with that and if he refuses that then the matter will have to come to court to sort out whether he was right to refuse or not.

I think Mr Sheehan agreed that there might be limits to the ability of a director to resist such a direction merely because he thought there might be a better way to deal with the Company’s assets, but he was careful to reserve his position generally on this matter.

In the context of the question of whether it might be proper for Mr Ipek to resist following a shareholders’ resolution under Article 4, Mr Sheehan also drew my attention to a line of jurisprudence which set bounds on the proper scope of a shareholders’ resolution.

He argued first, that there was a general principle about whether a power was being exercised in good faith in the interests of the Company as an entity.

In relation to this proposition he took me to Re Charterhouse Capital Ltd [2014] EWHC 1410 (Ch) (“Charterhouse”), an unfair prejudice case dealing with a contested amendment to the articles of association, and in particular dicta of Asplin J at [230]-[231] which were later considered by the Court of Appeal in Re Charterhouse Capital Ltd [2015] EWCA Civ 536; [2015] B.C.C. 574 (“Charterhouse CA”). He drew my attention to the judgment of Sir Terence Etherton C (as he then was) at [90] where he summarised certain principles, as follows (omitting case references):

“(1)

The limitations on the exercise of the power to amend a company’s articles arise because, as in the case of all powers, the manner of their exercise is constrained by the purpose of the power and because the framers of the power of a majority to bind a minority will not, in the absence of clear words, have intended the power to be completely without limitation. These principles may be characterised as principles of law and equity or as implied terms.

(2)

A power to amend will be validly exercised if it is exercised in good faith in the interests of the company.

(3)

It is for the shareholders, and not the court, to say whether an alteration of the articles is for the benefit of the company but it will not be for the benefit of the company if no reasonable person would consider it to be such.

(4)

The view of shareholders acting in good faith that a proposed alteration of the articles is for the benefit of the company, and which cannot be said to be a view which no reasonable person could hold, is not impugned by the fact that one or more of the shareholders was actually acting under some mistake of fact or lack of knowledge or understanding. In other words, the court will not investigate the quality of the subjective views of such shareholders.

(5)

The mere fact that the amendment adversely affects, and even if it is intended adversely to affect, one or more minority shareholders and benefit others does not, of itself, invalidate the amendment if the amendment is made in good faith in the interests of the company

(6)

A power to amend will also be validly exercised, even though the amendment is not for the benefit of the company because it relates to a matter in which the company as an entity has no interest but rather is only for the benefit of shareholders as such or some of them, provided that the amendment does not amount to oppression of the minority or is otherwise unjust or is outside the scope of the power.

(7)

The burden is on the person impugning the validity of the amendment of the articles to satisfy the court that there are grounds for doing so.”

Whilst these principles are articulated in relation to resolutions to amend the articles, I accept that similar principles may apply to other types of resolution.

Mr Sheehan argues accordingly that there are two types of prohibited resolution:

Again, Mr Sheehan was drawing my attention to these principles mainly to establish the following arguments (which I summarise in broad terms, which I accept will probably not do justice to the subtlety of Mr Sheehan’s arguments):

It is not appropriate for me to seek to determine the correctness of these propositions by way of summary judgment. Nor do I need to provide summary judgment on these matters in order to determine the question that is before me. For the purposes of determining this application by way of summary judgment I will assume (but not determine) that Mr Ipek would be able to establish these propositions at trial.

The more pertinent question is how the principles to which Mr Sheehan has referred me affect the question of whether, after Mr Ipek has undertaken not to question the authority of the directors of Koza Altin to pass a resolution, the rationale for a just and equitable winding up disappears – on the basis that this breaks what Mr Caplan has referred to as a deadlock and provides Koza Altin with sufficient control such that it now has another way of resolving the position that it finds insupportable.

My conclusion is that this probably does change the position and that certainly I cannot give summary judgment (on the basis of the facts established before the court at present) on the basis of determining that it does not.

I have reached this conclusion slightly warily as the point is untested (Mr Ipek having offered his undertaking only during the course of the hearing) and having regard to Mr Sheehan’s suggestions that Mr Ipek might, notwithstanding having given up the Authority Claim, still be able to resist directions given under Article 4 on the basis either that the particular resolution was obviously not in the interests of the Company, or that it prejudiced his individual rights as the holder of the A ordinary share (both being points that Mr Sheehan speculated might be open for Mr Ipek to make).

Making all due allowance for the fact that Mr Sheehan was having to respond on his feet to the questions I was putting to him, it seemed to me that the arguments that he thought that Mr Ipek might be able to mount against the postulated wind-down resolutions lacked credibility.

Essentially there were two arguments:

It is not for me to determine these matters at this stage (not least as they arise only theoretically), but I think I can say that if the maintenance of a deadlock or of an unsupportable status quo depends on Mr Ipek being able to deploy such arguments as these, I consider that there is a realistic (and certainly more than fanciful) argument that no such deadlock exists and that Koza Altin has another way in which it could bring to an end the situation which it finds insupportable.

As regards the first argument, if a sale of the assets of the Company was mandated by a special resolution passed under Article 4 as a commercial transaction with an arm’s length third party that Koza Altin, as ordinary shareholder, considered to be in the best interests of the Company, it is difficult to see how Mr Ipek could challenge that on the basis of Charterhouse CA - he would need to show that it was manifestly obvious that this was not in the interests of the Company.

Mr Sheehan suggested that a challenge might be mounted to the further elements of the postulated wind-down resolutions on the basis that it was not in the interests of the Company to part with all of its assets in the form of a dividend or return of capital, but I cannot see how that could be correct. In one sense any transfer of value from a company to its shareholder could be argued not to be in the best interests of the company. However such an argument ignores the point that commercial companies exist to make returns to the shareholders entitled to those returns, and it cannot seriously be suggested that shareholders are prevented by the interests of the company from passing resolutions to approve or mandate dividends or returning capital to shareholders (in each case assuming the correct procedures are followed). Such resolutions are passed, without challenge, every day.

As regards the second argument, to the extent that Mr Ipek’s share has some significant economic value while the Company remains trading (and I must accept, at least for the purposes of summary judgment, that it has some value in excess of £1), I can see that this value would be destroyed if Koza Altin were to put the postulated wind-down resolution into effect - the Company would thereby become dormant company with no material assets, no business and no ability to pay a director.

However, the postulated wind-down resolution would not abrogate the legal rights of Mr Koza as the holder of the A ordinary share - he would still have what he is entitled to, the ability to carry on as a director, to block a resolution to wind up or if a winding up is later approved to obtain the return of his £1 subscribed capital. In such circumstances, I do not believe that Mr Ipek would be successful in arguing against the postulated wind-down resolution on the grounds that it affected his rights as a shareholder, or (as the point was separately argued) that the resolutions could be regarded as amounting to resolutions to wind-up the company, and so would be invalid under Article 26 unless consented to by the holder of the A ordinary share.

Mr Caplan has referred me to Miso at [132]-[133] (“Miso”) (which in turn refers to the judgment of Snowden LJ in Re Compound Photonics Group Ltd [2022] EWCA Civ 1371) for the proposition that the courts recognise a distinction between a shareholders’ vote altering the legal rights of other classes of shareholder and the value of rights of shareholders. As the judge in Miso, Sarah Worthington DBE KC(Hon) sitting as a Deputy High Court Judge put it:

“This is because in none of these cases is the shareholder’s vote altering the legal rights of all shareholders, including the dissenting shareholders. It is irrelevant that, in these latter examples, the vote may alter the value of the rights [of] shareholders. That is an incident of almost every corporate activity.”

This was in the context of a question whether a shareholder could act in his own interests in vetoing reserved matters, but the principle has wider application.

Of course, the high-level analysis I have outlined above on the basis of theoretical special resolutions that Koza Altin might choose to pass cannot be regarded as a judicial determination of the validity of such resolutions. That matter would need to be determined on the facts. However, I consider that this analysis does suffice to allow me to reach a conclusion that, now that Mr Ipek has undertaken not to pursue his Authority Claim in the English courts, there remains at the very least a realistic, and definitely more than fanciful, chance that Mr Ipek could argue that there is no deadlock that could not be resolved by a lawful direction being given under Article 4, and therefore that the Claimant will be unable to establish the central plank of their argument justifying a just and equitable winding up.

Accordingly, on the basis that the court will rely on Mr Ipek’s undertaking, I consider that the application for summary judgment on the petition for winding up must be dismissed.

Having determined this point, there is no need for me to consider in detail the other arguments that Mr Ipek has put forward to resist the application for summary judgment, but I think it would be helpful nevertheless to deal with these points briefly, in particular as they may have some bearing on the alternative relief asked for by Koza Altin relating to the striking out of Mr Ipek’s and Koza Ltd’s Points of Defence.