High Court ticks off Watchfinder board for refusing to issue options (Watson and others v Watchfinder.co.uk)

High Court ticks off Watchfinder board for refusing to issue options (Watson and others v Watchfinder.co.uk)

In this case the High Court considered a provision in an option agreement which purported to give the company’s board an absolute veto over the exercise of the option. The High Court considered whether there was an implied duty on the directors not to act unreasonably, capriciously or arbitrarily in deciding whether to give its consent.

Original news

Watson & Ors v Watchfinder.co.uk Ltd [2017] EWHC 1275 (Comm)

In this case the High Court considered a provision in an option agreement which purported to give the company’s board an absolute veto over the exercise of the option. The High Court considered whether there was an implied duty on the directors not to act unreasonably, capriciously or arbitrarily in deciding whether to give its consent.

What was the background to the case?

This was a claim brought by three individuals, Marcus Watson, Rob Hersov and Twysden Moore (the Claimants) for specific performance of a written share option agreement (the Option Agreement) made between them and the defendant company, Watchfinder.co.uk Limited (Watchfinder).

The Claimants were all directors of and shareholders in a company called Adoreum Partners (Adoreum) which was a business development consultancy. Adoreum was engaged by Watchfinder to provide various services, including introducing new prospects, investment investors and partners. Adoreum was paid a monthly retainer for this under a services agreement and the Claimants and Watchfinder separately entered into the Option Agreement, which entitled them to exercise options over Watchfinder shares.

By a letter dated 4 March 2016, the Claimants sought to exercise the option. It was common ground that all the formal steps required for the exercise of the option by the Claimants had been fulfilled. However, Watchfinder relied upon Clause 3.1 of the Option Agreement, which provided that the option could only be exercised with the consent of a majority of Watchfinder's board of directors.

What were the issues in the case?

The key issues in the case were:

  • whether the Watchfinder board

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