Business partnership disputes between directors, partners or shareholders

There are great benefits in a shareholders dispute in acting early and taking professional advice, often we are called in at a late stage limiting the client's options. For minority shareholder's this advice is particularly apt, minority shareholders or 50/50 shareholders often give away their bargaining power too quickly and easily, if you are aware of impending problems with your fellow shareholder's protect your position by taking some initial legal advice as soon as possible.

The longer you put off taking advice, the more time and money you will eventually spend sorting out the problem, and the more it will damage your business.

Common Shareholder Disputes

The list of shareholder disputes we come across is long and varied and these are some of the most common, generally speaking many of them stem from a breakdown in trust between the Directors, disagreements over the direction and development of the company, conflicts of interest between them etc. Examples include:

Section 944 petitions (formally section 459 petitions)
Breaches of directors’ duties
Salary disparities between directors
Derivative actions brought by shareholders
‘Unfair Prejudice’ proceedings
Breaches of Shareholders Agreements
Dividend Disputes
Underperforming Director or Shareholders

Many of these issues can successfully be overcome, sometimes by the parties themselves and sometimes only with the help of outside mediation. Rare indeed and possibly unique is the business in which shareholders have never quarrelled or had disputes.

The most important thing is to recognise when a dispute has begun to have an ongoing negative effect on the performance of the business and/or your personal wellbeing and then make rapid steps towards dispute resolution before further damage is done.

Minority Shareholders Rights

The majority of clients we represent in shareholder disputes are minority shareholders. Typical scenarios minority shareholders face are:

Exclusion from the day-to-day management of the business
Not receiving the dividends or profit share they are entitled to
Fellow shareholders operating against their interests

The position and rights of minority shareholders are often difficult but under the Companies Act of 2006 they can have redress against majority shareholders if they have been subject to 'unfair prejudice' conduct by the company.

Examples of 'unfairly prejudicial' conduct would be:

Exclusion from management in circumstances where there is a (legitimate) expectation of participation
The diversion of business to another company in which the majority shareholder/s hold an interest
The awarding by the majority shareholders to themselves of excessive financial benefits
Abuses of power and breaches of the Articles of Association, repeated failures to hold AGMs; delaying accounts etc.

If an 'unfair prejudice' claim is upheld, the court can grant any remedy it thinks is fair. For example, it could order the company to buy the minority shareholders’ shares at a fair price and this is actually the most common outcome. If you are in this position it is important to take up to date advice when considering your options.

Settling Company Director Disputes - the Options

In simple terms you have 4 basic options:

Negotiation between you and your business partners
Independent mediation to solve the problem
Out of court settlement
Litigation and trial process

The first two options are generally the most preferable but the circumstances and best outcomes for each client will be unique to their own situation. Our solicitors will be happy to offer you full and honest opinion on what they believe will be your best course of action and share with you the likelihood of success and the cost implications for each possible course of action.

Contact Us

Please call us now to find out how we can help. Call 0207 831 0101 and ask to speak to the Shareholder's Dispute Team or you may use the contact us box on this page to email us the details of your enquiry and we will call you back to arrange a free initial consultation.