The High Court decision in Barry Maloney v Falcon VII Investment SARL [2025] EWHC 240 (Comm) provides important guidance on the interpretation of shareholders’ agreements, consent rights and the limits of unilateral corporate action. The judgment, delivered by Mr Justice Bright in the Commercial Court, will be of particular interest to investors, founders and businesses operating under complex shareholder and financing arrangements.
The case arose from a breakdown in relations between shareholders in a technology business and centred on whether certain corporate steps could be taken without the consent of a minority investor. The court’s approach reinforces the importance of careful drafting and strict compliance with contractual consent provisions in shareholders’ agreements governed by English law.
Background to the dispute
The claimant, Barry Maloney, was a major shareholder and chairman of a software company. The defendant, Falcon VII Investment SARL, was an investment vehicle that had provided financing and held a minority shareholding with enhanced rights under a shareholders’ agreement entered into in December 2018.
The shareholders’ agreement contained detailed provisions governing funding arrangements, consent rights and corporate decision making. Falcon VII’s investment structure included debt financing alongside equity participation, with specific protections designed to preserve its position until repayment and exit.
The relationship between the parties deteriorated in 2023 following proposals by Mr Maloney to restructure the company’s capital and repay financing linked to Falcon VII. The claimant sought to implement a series of steps which would have resulted in the repayment of debt and the effective removal of Falcon VII’s ongoing economic interest in the business. Falcon VII objected, asserting that its consent was required under the shareholders’ agreement and related documents.
The dispute ultimately turned on the interpretation of specific contractual provisions and whether the actions taken or proposed by Mr Maloney were permitted without Falcon VII’s approval.
The legal issues before the court
The central issue before the High Court was whether the claimant was entitled to rely on a clause in the shareholders’ agreement which referred to a defined concept of repayment to justify the steps taken without the defendant’s consent. Mr Maloney argued that the relevant clause permitted the repayment of the financing and the associated corporate actions notwithstanding other consent requirements.
Falcon VII argued that the clause was narrow in scope and applied only to the act of repayment itself, not to preparatory or related corporate measures such as capital restructuring, shareholder resolutions or changes to governance arrangements. It also contended that the claimant had breached information rights and had acted outside the authority conferred by the agreement.
Additional issues included whether the appointment of an investment bank was valid under the contractual framework and whether Falcon VII had validly terminated a related services agreement.
Mr Justice Bright applied orthodox principles of English contract interpretation, focusing on the natural meaning of the words used, the defined terms within the agreement and the wider contractual context. The court rejected the claimant’s attempt to give the repayment clause an expansive interpretation.
The judgment made clear that even where contractual language appears broad, it must be read in harmony with the agreement as a whole. The court found that the defined term relied upon by Mr Maloney referred only to the repayment itself and did not override or disapply other consent provisions governing corporate actions. Preparatory steps and structural changes required separate consent and could not be justified by reference to a single clause taken in isolation.
The court also rejected arguments that certain individuals or arrangements fell within defined categories in the agreement, emphasising that defined terms must be applied precisely. In doing so, the judgment underlined that courts will not stretch contractual language to accommodate commercial objectives that are not clearly reflected in the drafting.
As a result, the High Court held that Falcon VII’s consent was required for the disputed actions and that the steps taken without that consent constituted breaches of the shareholders’ agreement. The appointment of the investment bank was also found to be invalid, and Falcon VII was held to have validly terminated the services agreement.
The claimant’s case was dismissed.
Key implications for shareholders and businesses
This decision serves as a reminder that shareholders’ agreements are strictly enforced according to their terms. Where consent rights are included to protect minority investors or financiers, the courts will uphold those protections unless the agreement clearly provides otherwise.
The case highlights the risks associated with attempting to restructure corporate arrangements unilaterally in the face of contractual consent requirements. It also demonstrates the importance of understanding how defined terms operate within complex agreements, particularly where financing and governance provisions intersect.
From a practical perspective, the judgment reinforces the need for businesses and investors to take legal advice before implementing significant corporate actions, especially where relationships have become strained or where competing interpretations of contractual rights exist.
How Penerley can help
Penerley advises shareholders, investors and companies on the negotiation, interpretation and enforcement of shareholders’ agreements and related commercial contracts. We support clients at all stages of the corporate lifecycle, from initial investment structuring through to disputes arising from breakdowns in shareholder relationships.
Our team regularly assists clients in assessing consent rights, governance obligations and risk exposure before major corporate actions are taken. Where disputes arise, we provide strategic advice on dispute resolution options, including negotiation, mediation and litigation in the High Court and Commercial Court.
Penerley also advises on the drafting and review of shareholders’ agreements to ensure that rights and protections are clearly expressed and aligned with commercial objectives. By addressing potential areas of ambiguity at the outset, businesses can reduce the risk of costly disputes and litigation later.
For clients facing contentious situations, we offer pragmatic and commercially focused guidance aimed at protecting value, preserving relationships where possible and achieving efficient resolution. The decision in Barry Maloney v Falcon VII Investment SARL demonstrates the importance of early legal advice and careful contractual analysis, areas in which Penerley provides trusted support.
