Kulkarni v Gwent Holdings Ltd – Court Rules Serious Breaches of a Shareholder Agreement Can Be Fixed

Court Rules Serious Breaches Can Be Fixed, Blocking Surgeon’s Bid To Buy Out Partner Cheaply

Shareholders who break the rules of their agreement can avoid being forced to sell their stake if they put matters right in time, the Court of Appeal has ruled. 

The case was a dispute over a private hospital in Newport, south Wales. It concerned the kind of clause found in many shareholders’ agreements, which makes a shareholder sell their shares, often at a low price, if they seriously break the agreement. 

Three senior judges unanimously dismissed an appeal by surgeon Rohit Kulkarni on 26 September 2025. Lord Justice Newey wrote the leading judgment, with Lady Justice Asplin and Lord Justice Lewis agreeing.

For more information, please read the full case on Kulkarni v Gwent Holdings Ltd & St Joseph’s Independent Hospital Ltd [2025] EWCA Civ 1206 (26 September 2025)

How The Dispute Began

Mr Kulkarni had worked at St Joseph’s Independent Hospital for years and was its medical director. When the company that owned it went into administration in February 2020, he turned to businessman David Lewis, who agreed to fund a new company to buy the hospital for £2m. 

Mr Lewis’s company, Gwent Holdings, took control of the board as a condition of the deal. On paper, Mr Kulkarni owned almost half the shares, but he had in fact bought only one, because he believed he should get the rest without paying. 

Within months the partnership had collapsed. In the summer of 2020, Gwent’s man on the board tried to dismiss Mr Kulkarni for gross misconduct, and Mr Kulkarni quit as a director and employee. Gwent then took the unpaid shares for itself, issued itself 2,000 more and declared the shareholders’ agreement at an end. The following year, it also refused at first to accept the person Mr Kulkarni had chosen to sit on the board. 

By late 2021, Gwent had reversed course: the board appointment went through, the disputed shares went back to the company, and Mr Kulkarni later paid £80,000 to have them registered in his name.

A Clause with Teeth

The agreement said that any shareholder guilty of a material or persistent breach would be treated as offering their shares for sale, unless the breach could be fixed and was fixed within 10 working days of the board formally asking for it. The seller would get either what they had originally paid or the shares’ fair value, whichever was lower. 

Mr Kulkarni hoped to use this clause to take over Gwent’s majority stake on those terms. Gwent accepted that its breaches were material and persistent, and serious enough to have entitled him to tear up the agreement. His case was that breaches that grave could never be cured, so the forced sale had kicked in regardless. 

The Court’s Reasoning

The judges found against him on every point. 

No formal demand, no forced sale. The board never asked Gwent to fix the breaches, so the 10-day period never began and the clause was never triggered. The court thought it made no sense for a shareholder who corrected a breach straight away to be treated more harshly than one who waited to be told. Because clauses like this can strip people of their property, the judges said they should be read narrowly. 

Grave does not mean incurable. The court held that the general legal rule on breaches serious enough to end a contract is a different matter from what a particular clause means. The agreement did not say that the worst breaches could never be put right, and the judges would not read that in. 

Look forward, not back. Whether a breach can be fixed is a practical question about restoring the proper position for the future, rather than undoing everything that has already happened. Returning the shares cured the share breaches, and the attempt to end the agreement had no real effect that needed reversing. The delay over the board seat made no practical difference either, since Gwent had a controlling vote on the board throughout. 

Why someone broke the rules rarely counts. The judges said the motive behind a breach would not usually affect whether it could be cured, and the trial judge had found Gwent’s behaviour was bad management, not a personal vendetta. 

Old friendships are beside the point. Although the two men had known each other before, the deal was negotiated at arm’s length, with no promise of good faith, so the court treated it as a standard commercial contract.

Lessons for Directors and Shareholders

For people in a boardroom or shareholder dispute, the case carries several practical messages. 

If you want to rely on a forced-sale clause, follow its procedure to the letter. Where it requires a notice asking for the breach to be fixed, nothing happens until that notice is served. 

If you are accused of breaching an agreement, correcting the problem quickly may protect you from losing your shares, even if the breach was serious. 

If you are drawing up an agreement, say clearly which breaches should lead straight to a forced sale. Courts will not assume that the most serious breaches are automatically incurable. 

Not every breach can be mended. The court gave examples such as disclosing confidential information or causing lasting harm, and accepted that excluding a shareholder from running the company might, on different facts, be impossible to repair. 

Other remedies remain. The judges pointed out that an injured shareholder could still claim compensation, bring the agreement to an end, or apply to court on the basis that the company’s affairs have been run in a way that unfairly harms them. That last route is known as an unfair prejudice petition under the Companies Act 2006. 

 

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