Shareholder Disputes

The term shareholder disputes covers a wide range of issues which can arise, often in situations where the shareholders or some of them are also directors.

Shareholder disputes also commonly arise relating to strategic and control issues between majority shareholders and minority shareholders. Such disputes are often complex, costly and have the potential to damage the company in it’s day to dealings. They can sometimes be avoided if  there are clearly drafted and agreed articles of association and a shareholders agreement for the company at the outset.

Our Commercial litigation solicitors in London have significant experience of advising on shareholder disputes, with an emphasis on a speedy resolution without incurring significant costs. Where this is not possible, we utilise the full range of tactics and legal options available for our clients in these types of cases.

Common types of Shareholders Disputes

The following are some common examples of shareholder disputes, generally involving issues of control, use of assets or strategy :

• The shareholders or some of them consider that the directors are breaching their duties
•  Disputes about dividend policies which may favour some shareholders over others
• Claims by minority shareholders that they are being “unfairly prejudiced” by controlling or majority shareholders
• Complaints relating to shareholders not being kept informed or fully informed as to the company’s finances
• Failure to inform shareholders of meetings and/or exclusion from meetings
• Breach of any existing shareholders agreement or the articles of association
• One or more of the main shareholders generally treating the company as exclusively theirs and manipulating matters to draw dividends or salary only for them, or diverting business to other entities controlled by them
• Conflict of interest claims

What action can be taken based on unfair prejudice?

It is difficult and expensive under the Companies Act 2006  for a minority shareholder to take formal court action, but the threat of such an application, and skilful negotiation can deliver results. The types of conduct which might be considered by a Court are fairly wideranging and include many of the examples given above which, if proven, can clearly be unfairly prejudicial to minority shareholders.

If a court considers that there has been unfair prejudice, it can make a range of Orders including that the company must be wound up, but the most common remedy, over and above possibly awarding legal costs of the action, will be an Order that the company or majority shareholder(s) purchase the minority shares at a “fair value” to be independently valued.

Conclusion

A regrettable consequence of almost any shareholder dispute is damage to the company itself, but sometimes, disputes cannot be avoided. Our highly skilled and experienced solicitors and lawyers will seek to avoid court action and negotiate a solution which resolves the dispute to avoid a repeat and save costs for you.

If you are a minority shareholder or facing any kind of shareholder dispute, please telephone us now, or complete our online shareholder disputes form for further advice and assistance.