Clarifying “That Capacity”: Scope of Deemed Transfer Notices in Company Articles

1. Introduction

Syspal Capital Ltd v Truman & Anor ([2025] EWCA Civ 469) concerns the interpretation of a pre-emption clause in the articles of association of Syspal Holdings Limited (SHL). SHL’s shareholding is split 76% to Syspal Capital Ltd (“SCL”) and 24% to Christopher Truman, the sole “Employee Member.” Mr Truman served SHL and its subsidiary, Syspal Limited (SL), in multiple capacities: employee, director, consultant. Following his dismissal from SL in October 2022 and later resignation as SHL director in May 2023, a dispute arose over when a “deemed Transfer Notice” was triggered and thus which valuation metric—Fair Value or Market Value—applied to Mr Truman’s share sale.

2. Summary of the Judgment

The Court of Appeal unanimously upheld the first-instance decision: a deemed Transfer Notice arose only when Mr Truman ceased “in that capacity” of being employed in any capacity by a group company, i.e. on his resignation as SHL director on 24 May 2023. Accordingly, his shares must be offered at Fair Value rather than the lower Market Value. The court interpreted “that capacity” to cover the overarching status of “being employed” (whether as employee, director, or consultant), not each role separately.

3. Analysis

3.1 Precedents Cited

Re Euro Accessories Ltd [2021] EWHC 47 (Ch)
Principles for interpreting contractual terms by reference to the whole document, its commercial context, and any reasonably available extrinsic facts.
Re a Company (No. 004377 of 1986) [1987] 1 WLR 102
An example of articles treating cessation of directorship and employment as separate triggers for pre-emption, invoked by SCL to argue that each capacity should trigger a notice.
Shanda Games Ltd v Maso Capital Investments Ltd [2020] UKPC 2
Discusses minority discount principles under s.994 of the Companies Act 2006, cited to show that low-valued forced sales of minority shareholdings are commercially accepted.

3.2 Legal Reasoning

The dispute focused on the phrase in Article 11.3: “and does not continue in that capacity in relation to any Group Company.” The court applied the modern approach to contract interpretation:

Examine the wording in context: “that capacity” can refer to the single concept of being employed in any capacity, not necessarily to each role separately.
Commercial common sense: The default valuation is Fair Value; the lower Market Value should apply only where clearly intended. A construction requiring forced sale at Market Value whenever any single capacity ended would be commercially irrational and contrary to shareholder intentions.
Surrounding facts: At adoption in December 2015, Mr Truman was the only Employee Member. Article 11.3’s reference to consultants would be redundant if each separation of capacity automatically triggered the low valuation.
Collateral articles: Article 9.2, which treats share transfers on family gifts, presupposes that Article 11.3 only applies when employment ceases altogether.

3.3 Impact

This decision:

Clarifies how singular expressions like “that capacity” must be read in context, helping future courts interpret analogous provisions in articles or shareholder agreements.
Reinforces that default valuation provisions (Fair Value) are not easily displaced by exceptions unless unambiguous language demands a lower valuation.
Alerts practitioners drafting share-transfer clauses to the importance of clear wording where multiple roles can be held.
Emphasizes the use of extrinsic company-specific facts (e.g., single shareholder roles) in construction arguments.

4. Complex Concepts Simplified

Deemed Transfer Notice: A mechanism under pre-emption provisions whereby a shareholder is treated as if they have given notice to sell their shares upon certain events (e.g., cessation of employment).
Fair Value vs. Market Value:
- Fair Value—generally a higher valuation, reflecting intrinsic worth without discounting for minority interests.
- Market Value—reflects the price a willing buyer would pay, often discounted for minority shareholdings.
Commercial Common Sense: A principle in contract law that interprets provisions in a way that business people would have intended and which avoids commercially absurd results.
Extrinsic Evidence: Facts outside the four corners of the document (e.g., company filings) that a reasonable reader would know and which inform interpretation.

5. Conclusion

Syspal Capital Ltd v Truman establishes that in pre-emption clauses, references to “that capacity” of employment must be construed against the backdrop of the entire articles, commercial purpose, and surrounding circumstances. A singular reference may encompass a composite role rather than individual capacities. This judgment highlights the necessity for precise drafting of multi-role triggers and reinforces the primacy of Fair Value as the default share valuation absent clear contractual intention to the contrary.