Deemed transfer clauses require a notice to remedy and repudiatory breaches can be “capable of remedy”

Commentary on Kulkarni v Gwent Holdings Ltd & Anor [2025] EWCA Civ 1206 (CA)

Introduction

The Court of Appeal (Newey LJ, with Asplin LJ and Lewis LJ agreeing) in Kulkarni v Gwent Holdings Ltd & Anor [2025] EWCA Civ 1206 has delivered a significant ruling on the operation of “deemed transfer” provisions in shareholders’ agreements (SHAs), the meaning of “capable of remedy” in such clauses, and the role of recitals and pre-existing relationships in contractual construction.

The dispute arose from a 13 February 2020 SHA between Mr Rohit Kulkarni (a consultant surgeon and long-time participant in the hospital enterprise), Gwent Holdings Ltd (a vehicle for Mr David Lewis), and St Joseph’s Independent Hospital Ltd (the Company). The SHA set out board control, transfer, and consent mechanics. After relations between Mr Kulkarni and the Lewis interests broke down in mid-2020, Gwent caused the Company to allot shares to itself, purported to terminate the SHA, and resisted Mr Kulkarni’s appointment of his nominee as a director. These acts were later accepted as material (and in some instances repudiatory) breaches.

The core issues on appeal were:

• Whether, under clause 7.1(d) of the SHA, the deemed service of a transfer notice arises upon any “material or persistent breach” irrespective of remediation unless and until the board serves a notice to remedy; or whether the service of a notice to remedy (and non-remedy within 10 business days) is a condition precedent to any deemed transfer when the breach is remediable.
• Whether a repudiatory breach is, as a matter of principle, incapable of remedy within such a clause.
• Whether the recitals to the SHA generated a contractual estoppel that the parties would be bound by the fiction that Mr Kulkarni already held 1,652 A shares at execution (and the consequences of that).
• Whether the pre-existing friendship/relationship between the individuals could inform contractual construction or the concept of remediability.
• Whether the specific breaches (share allotments, purported termination, and refusal to recognise a director appointment) were remediable in fact and within the contract’s 10 business day window.

Summary of the Judgment

• Clause 7.1(d) requires a notice to remedy as a necessary precondition before any deemed transfer can arise for a breach that is capable of remedy. No notice, no deemed transfer (for remediable breaches). There is no “twilight period” in which a deemed transfer springs into existence before notice and is later undone if remedied.
• A repudiatory breach is not necessarily incapable of remedy for the purposes of clause 7.1(d). “Capable of remedy” is to be assessed pragmatically: whether the mischief can be cured going forward, not whether the past can be erased.
• No contractual estoppel arose from the recitals. The recitals were construed as acknowledging entitlement rather than present ownership of shares; they did not bind the parties to a fiction known to be false.
• The parties’ prior friendship or personal relationship did not affect the construction of the commercial agreement or the analysis of remediability.
• All the breaches in issue (allotment of A and B shares, attempted termination, and delayed recognition of a director appointment) were capable of remedy and were in fact remedied.
• The appeal was dismissed.

Factual and Contractual Background

Mr Kulkarni, a senior clinician and former medical director at St Joseph’s Independent Hospital in Newport, held shares in the former owner (OldCo) and was a creditor. Following OldCo’s financial distress and administration in February 2020, a group led by David Lewis proposed a rescue and purchase of the hospital via the new Company. The SHA (13 February 2020) set out governance and transfer restrictions:

• Schedule 1 recited Gwent and Mr Kulkarni as initial A shareholders: Gwent 1,718 A shares; Kulkarni 1,652 A shares (though in fact he then held only one A share).
• Board control: A shareholders could each appoint a director (cl 13.2), but Gwent’s appointee carried decisive voting power such that they could carry or defeat any board proposal (cl 14.5), and Gwent’s appointee was needed for quorum (cl 14.1).
• Shareholder consent: The Company could not change share capital or register new members without “Shareholder Consent” (majority of A shares, excluding the “Excluded Shareholder”)—Schedule 2 paras 3–4, and cl 1.1.
• Transfer mechanics: Under clause 7.1(d), a shareholder is deemed to serve a transfer notice immediately before committing a material or persistent breach of the SHA “which, if capable of remedy, has not been so remedied within 10 Business Days of notice to remedy the breach being served by the Board (acting with Shareholder Consent)”. A deemed transfer carries a price cap at the lower of subscription price and fair value (cl 7.3(d)), and the notice may not be withdrawn (cl 6.7, cl 7.3(e)).

After a governance fracture amid COVID-19, Gwent caused the Company to allot to itself 1,651 A shares (originally attributed to Mr Kulkarni in the SHA) and 2,000 B shares (21 and 28 August 2020). It also purported to terminate the SHA (28 August 2020) and later resisted the validity of Mr Kulkarni’s nomination of Mr Hussain as a director (May–November 2021). By trial, Gwent accepted those were material breaches (some repudiatory). The trial judge held they were also persistent, but capable of remedy and remedied; therefore no deemed transfer notice arose. Mr Kulkarni appealed.

Detailed Analysis

Issue (i): Notice to remedy is a condition precedent for a deemed transfer where the breach is remediable

The Court affirmed the judge’s construction that clause 7.1(d) requires:

1. a material or persistent breach;
2. a board notice to remedy (given with Shareholder Consent);
3. failure to remedy within 10 business days thereafter.

Without step (2), the deeming mechanism does not engage for breaches capable of remedy. Key reasons:

• Text and structure: The “event” in clause 7.1(d) can naturally be read as the non-remedy by the end of the specified period following notice, not the breach itself. The word “within” means “by the expiry of” the period, not “not earlier than nor later than”.
• No “twilight period”: The agreement nowhere contemplates a deemed transfer arising upon breach and then being undone by a later notice and cure. Indeed, a deemed transfer may not be withdrawn (cl 6.7; cl 7.3(e)). If a twilight state had been intended, one would expect an express time-limit for serving the notice to remedy; there is none.
• Expropriatory caution: Deemed transfer provisions are expropriatory—they can force a sale at a potentially depressed price. Following Arden LJ in Re Coroin Ltd [2013] EWCA Civ 781 at [65]–[67], such provisions should not be triggered by uncertain language or doubtful implications. A narrower, notice-dependent construction is preferred.
• Commercial comparators: In Force India Formula One Team Ltd v Etihad Airways PJSC [2010] EWCA Civ 1051, a materially identical termination clause was treated as requiring notice for remediable breaches.
• Practicality: The appellant’s construction would perversely place an immediate remediator in a worse position than someone who waits for a notice; and it would create avoidable complexity.

The Court also rejected the argument that the clause would become toothless because a wrongdoer might influence the board not to serve a notice. The clause is drafted to require “Shareholder Consent” by a majority of A shareholders excluding the “Excluded Shareholder”. That allocation of power is part of the contractual risk the parties accepted; it does not justify rewriting the preconditions for an expropriatory outcome.

Issue (ii): Repudiatory breaches are not, by that fact alone, incapable of remedy for clause 7.1(d)

The Court distinguished the common law of repudiation from contractual “capable of remedy” tests. Buckland [2011] QB 323 establishes that a repudiatory breach cannot be unilaterally “cured” so as to remove the innocent party’s election to affirm or terminate. But this tells one nothing about whether a breach is “capable of remedy” in a clause like 7.1(d), which is a different, contract-specific inquiry.

The governing approach is “practical rather than technical,” per:

• Schuler v Wickman [1974] AC 235 (remedy means “cure so that matters are put right for the future”, not erasing past effects);
• Savva v Hussein (1996) 73 P&CR 150 (is the mischief removable?);
• Akici v LR Butlin [2006] 1 WLR 201 (most breaches are in principle remediable; adopt practical, not technical, approach);
• Telchadder [2014] 1 WLR 4004 (ask whether and how the mischief can be redressed; value judgment, fact-sensitive);
• Force India (accepted that remediability analysis applies even to breaches that may ultimately be repudiatory).

Accordingly, the mere fact that a breach is repudiatory does not automatically render it irremediable for the purposes of a notice-and-cure clause in a commercial agreement.

Issue (iii): No contractual estoppel from the SHA recitals

The recitals, read with Schedule 1, stated that Mr Kulkarni “is the registered owner” of 1,652 A shares. In fact, he then held only one A share. The Court declined to find a contractual estoppel:

• On objective construction (Investors Compensation Scheme; Wood v Capita), a reasonable reader would treat the recitals as recognising an entitlement to issue/registration rather than asserting a false present fact known to all to be untrue.
• Greer v Kettle [1938] AC 156 requires clear, certain, unambiguous language to create an estoppel by recital; that threshold was not met. The commercial improbabilities of treating the recital as a binding admission (e.g., capital contributions on false premises) reinforce this conclusion.
• In any event, the supposed estoppel would have been peripheral: it would not have altered remediability analysis or the mechanics by which the share allotment breaches could be reversed.

Issue (iv): Pre-existing relationships are irrelevant to construction and remediability

Although the business connection originated in personal relations, the SHA was a negotiated commercial instrument with no express duty of good faith and with express mechanisms for board control and consent. The Court agreed with the judge that:

• The contract looked and operated as a typical commercial agreement;
• Mr Lewis acted as a commercial investor;
• The parties’ friendships did not change the construction of the clause or the practical question of remediability.

Issue (v): The breaches were “capable of remedy” and, on the facts, were remedied

The Court endorsed the judge’s evaluative findings (to which an appellate court will be slow to interfere) that:

• Share allotment breaches (A and B shares): These were practically reversible by returning the shares to the Company and unwinding the erroneous allotments. That cures the mischief going forward. The fact that the actual buy-back took more than 10 business days was not determinative: it was capable of being completed within that period, and in any case the 10-day clock runs from service of a notice to remedy—none was served here.
• Purported termination breach: It changed nothing. The “genie never truly left.” Acknowledging the ineffectiveness of the purported termination remediated the breach going forward. Any damages claim was separate (and was not pursued).
• Refusal to recognise Mr Hussain’s directorship: The eventual appointment restored the proper position going forward. Given clause 14.5’s board control mechanics, earlier recognition would not have altered outcomes. While exclusion from management can in some cases be irremediable, on these facts its impact was not of that character.

Precedents Cited and How They Shaped the Outcome

• Re Coroin Ltd [2013] EWCA Civ 781: Arden LJ stressed that expropriatory provisions limiting transfer rights should be construed narrowly, not by doubtful implication. This underpinned the Court’s reluctance to trigger compulsory transfers without clear compliance with notice-and-cure preconditions.
• Force India Formula One Team Ltd v Etihad Airways PJSC [2010] EWCA Civ 1051: The Court treated a materially similar “material breach—if capable of remedy—cure within X days after notice” clause as requiring a notice for remediable breaches. It also illustrates irremediability where the “marketing genie” cannot be put back in the bottle. Both aspects were deployed here: notice is a precondition; irremediability is a practical assessment.
• Schuler v Wickman [1974] AC 235: Classic exposition that “remedy” means cure for the future; you need not erase the past. Central to the Court’s approach to remediability.
• Savva v Hussein and Akici v LR Butlin: Landlord and tenant analogies endorsing a practical, common-sense approach; most breaches are remediable unless they carry enduring stigma (e.g., illegal use, subletting) or the mischief cannot sensibly be undone.
• Wickland (Holdings) Ltd v Telchadder [2014] UKSC 57: The Supreme Court adopted the “practical” inquiry—can the mischief be redressed?—and recognised that some anti-social behaviour may be irremediable where its effects endure.
• Buckland v Bournemouth University [2010] EWCA Civ 121: A repudiatory breach cannot be unilaterally “cured” at common law; the innocent party’s election remains. The Court explained that Buckland does not define “capable of remedy” in a contractual notice-and-cure provision. Distinct inquiries.
• Crane v Wittenborg and Woodchester: Both proceed on the basis that notice-and-cure regimes can apply even where the underlying breach might be repudiatory; Woodchester assumes non-payment is “capable of remedy” for a statutory default notice regime.
• Phoenix Media v Cobweb: Neuberger J observes that materiality and irremediability can overlap, but the latter remains a common-sense, practical concept. Deliberateness may bear on remediability only where a relationship of trust/good faith is contractually at stake.
• Suisse Atlantique [1967] AC 361: Wilfulness may be relevant to whether a breach is repudiatory/fundamental, but not determinative of remediability in a notice-and-cure framework. The Court used it to cabin arguments about motive.
• ICS v West Bromwich and Wood v Capita: Objective construction; applied to reject contractual estoppel from recitals.
• Henderson v Foxworth, R (R) v Chief Constable of GMP, Re Sprintroom: Appellate restraint on findings of fact and evaluative judgments—relevant to upholding the judge’s remediability assessments.

Legal Reasoning Synthesised

The Court’s reasoning proceeds from core interpretive anchors:

• Read expropriatory clauses narrowly and coherently within the scheme of the SHA (consent mechanics; non-withdrawal of deemed notices; decisive voting power; absence of twilight devices).
• Give ordinary effect to notice-and-cure language familiar from commercial contracts and statutory analogues.
• Separate the common law of repudiation (innocent party’s election) from contractual “capable of remedy” tests; the latter are pragmatic and forward-looking.
• Respect the judge’s evaluation of remediability on the facts; focus on whether the mischief can be put right going forward within the contractual timeframe measured from notice.
• Constrain attempts to import personal relational contexts or recitals to alter a commercial instrument’s operation absent clear language.

Impact and Practical Implications

For drafters of shareholders’ agreements

• If the intention is that a material breach automatically triggers a deemed transfer regardless of remediation, say so expressly and deal with timing and reversal. Absent clear language, courts will require a notice to remedy for remediable breaches.
• Consider whether to:
  • Define “capable of remedy” in the agreement to reduce uncertainty (e.g., “capable of remedy means steps which, if taken within X business days, will prevent recurrence and remove the mischief for the future”);
  • Specify whether repudiatory breaches are to be treated as irremediable for clause purposes (the Court did not impose this as a default);
  • Address the “gatekeeper risk” by allowing the non-breaching shareholder to serve a notice to remedy directly, or by empowering an independent director or an independent contractual decision-maker to issue the notice;
  • Introduce a time limit for serving a remediation notice to avoid strategic delay;
  • Calibrate the price consequences of a deemed transfer (caps/floors) and the interplay with persistent/material thresholds.
• Be cautious about relying on recitals to establish matters of share ownership or funding. If present ownership is critical, ensure the issuance/registration occurs or is made expressly conditional with clear consequences.

For governance and board practice

• Where a notice-and-cure regime exists, document the decision-making around serving (or not serving) a notice to remedy. Minutes and shareholder consent mechanics must be observed.
• If a breach is asserted to be irremediable, the file should evidence why the mischief cannot be practically redressed; otherwise a court may expect a notice to be served.

For litigators and parties in dispute

• To activate a deemed transfer on a remediable breach, you will ordinarily need: (i) board action; (ii) shareholding consent in the defined form; (iii) expiry of the cure period without cure. Without these, the clause likely does not fire.
• Repudiatory character does not short-circuit remediability analysis in such clauses, though it remains relevant to the innocent party’s election at common law and potential damages.
• Prepare evidence on feasibility and timelines of remedy. The 10 business day window (if present) runs from notice; capability is assessed practically, not technically.
• Consider alternative remedies: damages; injunctive relief; or a petition under Companies Act 2006, s.994 (unfair prejudice), though the scope may be shaped by the SHA.

Transactional hygiene

• Synchronise share allotment, consideration flow, stamping/filings, and board/shareholder approvals to avoid “recital fact” mismatches. Treasury share buy-backs and SH03 processing lead times should be anticipated but do not necessarily preclude remedy within cure windows if the core reversal can be transacted swiftly.

Complex Concepts Simplified

• Deemed Transfer Notice: A mechanism by which a shareholder is treated (by contract) as having served a notice to sell shares, often on disadvantageous price terms. It is a contractual fiction triggered by defined events.
• Expropriatory Clause: A contract term that can deprive a person of property rights (e.g., forcing a share sale). Courts construe these restrictively; the language must be clear.
• Material vs. Repudiatory Breach: A material breach is serious enough to matter under the contract; a repudiatory breach is so serious that the innocent party can choose to terminate the contract. Not all material breaches are repudiatory; but some are. Whether a breach is repudiatory at common law does not decide whether it is “capable of remedy” under a notice-and-cure clause.
• “Capable of Remedy” (Practical Test): The question is whether the mischief can be put right for the future (e.g., reverse an allotment; re-admit a director; acknowledge invalid termination), not whether one can erase the past. Some breaches (e.g., longstanding stigma; publishing confidential information; running a brothel) may be irremediable because their effects persist.
• “Twilight Period”: A hypothesised interim where a deemed transfer would exist before notice and be reversed upon cure. The Court rejected that concept absent clear drafting.
• Contractual Estoppel by Recital: Parties can sometimes agree to treat specified facts as true for the purposes of the contract. This requires clear, unambiguous language and must fit the commercial context. It cannot lightly convert known falsehoods into binding truths.

What the Court Did Not Decide (and drafting opportunities)

• The Court did not hold that repudiatory breaches are always remediable—only that they are not automatically irremediable. Drafters may stipulate that certain breaches (e.g., fraud, leakage of confidential information, illegal acts) are deemed irremediable.
• The Court did not find that deliberate motive makes a breach irremediable. If parties want motive to matter, they should say so expressly (e.g., “wilful breach shall be deemed irremediable”).
• The Court did not resolve how to compel a notice to remedy where the governance structure blocks it. Parties can allocate the right to serve notices to non-breaching shareholders or an independent officer.

Conclusion

Kulkarni v Gwent Holdings clarifies two important points of general application in shareholder agreements and beyond:

• Where a clause provides that a breach “which, if capable of remedy, has not been remedied within [X] days of notice” triggers an expropriatory consequence, service of a notice to remedy is a condition precedent for remediable breaches. Courts will resist creating unexpressed twilight effects in such regimes.
• Whether a breach is “capable of remedy” is a practical, forward-looking question. Repudiatory character at common law does not, by itself, make a breach irremediable for the purpose of a notice-and-cure clause.

The Court also signalled that recitals will rarely bind parties to fictions known to be false, and that the warmth or history of personal relationships cannot be used to rewrite a commercially structured agreement or to expand the reach of an expropriatory clause.

For practitioners, the case underscores the need for crisp drafting of deemed transfer provisions (clarifying preconditions, timing, and what counts as irremediable), disciplined governance around notices to remedy, and careful separation of common law repudiation analysis from contract-specific cure mechanisms. For litigants, the decision provides a clear roadmap: prove the notice; prove non-cure within time; and demonstrate why the mischief could not be practically put right—otherwise the compulsory transfer will not bite.