Shareholder Disputes
Shareholder Dispute Solicitors
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Shareholder Dispute Solicitors
Shareholder disputes can become acrimonious when running a business, and it can be damaging when things go wrong. If not handled correctly, disputes between shareholders can result in expensive legal fees, high levels of stress, and even the end of the business.
It’s not uncommon for business interests to differ and resolving a difference of opinion doesn’t have to be a hostile process. In fact, with proper legal support, it is possible to end most shareholder disputes quickly and with minimal impact on
everyone involved.
If you are facing a shareholder dispute, regardless of the issues involved, we can help you repair the relationship or reach a clean break; so everyone can move forward in the best possible position. Contact us today for an initial consultation by completing the enquiry form or calling 020 7467 3980.
Types of shareholder disputes
With many years experience in resolving shareholder disputes, our specialist team will be familiar with your situation and be well placed to guide you forward. Below are the most common types of shareholder disputes we regularly assist our clients with:
- Disagreements over the (planned) direction of a company
- Personality clashes between shareholders
- Where a shareholder feels excluded from meetings/management
- Where minority shareholders feel that they are being unfairly treated
- Where shareholders believe they are not being informed about the business’s financial status
- Where a shareholder is underperforming
- Where a shareholder has fallen ill and can no longer contribute
- Where a shareholder has died, and the other shareholders do not want to work with the beneficiaries
- Where a shareholder is believed to be in breach of their duties
- Where a shoulder has a conflict of interest
- Where a shareholder believes the company is run in the interests of other shareholders, but not their own
- Where someone wants to leave a business
- Where there is an acquisition offer and not all shareholders agree on the bid.
Minority shareholder disputes
Under UK law, minority shareholders have an automatic right to statutory protection. So, if they disagree with the direction of a company, believe that a director is in breach of their duties, or feel they are being mistreated, they can take legal action to resolve the issue. The majority shareholders cannot punish them for doing this.
While the specific details can vary, most minority shareholder disputes happen
because they disagree with the majority shareholders’ actions. If you find yourself in this situation, our expert shareholder dispute lawyers will establish whether you have a case, advise you on the possible outcomes, gather the necessary evidence, and devise a strategy to help secure your objectives.
In most cases, we seek to avoid costly and disruptive litigation. But, where
necessary, we have everything it takes to protect your position at court. Because we have experience acting for minority and majority shareholders, we anticipate the other side’s strategy and use that to your advantage.
50/50 shareholder disputes
When two parties each own 50% of a company’s shares, a lack of a casting vote can lead to deadlock. Even when dealing with minor disagreements, shareholders can ‘double-down’ into entrenched positions making resolution feel impossible.
With neither shareholder able to outvote or remove the other, it is not uncommon for one party to apply to the courts for a winding-up petition, and for the company to go into liquidation. However, the court will expect the shareholders to have undergone professional mediation first.
At Summit Law, we use mediation to help resolve 50/50 shareholder disputes. We do this either by negotiating an end to the deadlock, or by paving the way for an equitable winding-up petition if the impasse cannot be resolved by any other means.
Stopping a bad situation from escalating, our expert legal advice helps both 50/50 shareholders to end a traumatic and potentially devastating situation and move on with their lives.
Rights of a shareholder
Shareholders do not control the day-to-day running of a company unless they are also directors. Nevertheless, shareholders do have a range of rights (and limitations). The rights of each shareholder will depend on several factors.
These rights and obligations are detailed in a company’s articles of association and any shareholder agreements.
The Companies Act 2006 also lists several rules that apply to all Private and Public Companies in the UK. Often, the provisions of the Act override the company’s own documentation.
The rights of each shareholder are usually defined by the type and number of shares owned. Nevertheless, most shareholders have the right to:
- Have their name listed in the company’s Register of Members
- Be notified about General Meetings and attend them (or appoint a proxy to attend on their behalf). This does not include director meetings
- To vote at General Meetings (or appoint a proxy). Some shares give the owner multiple votes, while other shares carry no voting rights.
- To receive a share of the company’s profits if the directors declare a dividend. Not all classes of shares have a right to dividends.
- To receive and inspect several documents, including the company’s annual report and accounts, the terms of directors’ service agreements, the company’s constitutional documents, minutes of general meetings, etc.
- To receive a copy of any resolution proposed/passed by the directors or shareholders.
- To receive payment from any surplus funds if the company is wound up.
A professionally drafted shareholders’ agreement and articles of association can ensure any disputes are resolved quickly, with minimum damage to your business.
How to resolve shareholder disputes
The best way to resolve a shareholder dispute will depend on your specific situation and what agreements and articles are in place. In any case, you should seek early legal advice to mitigate the extent of the dispute and ensure the company can continue trading.
As a first step, we encourage mediation or arbitration to see if both parties can reach an agreement. A mediator cannot enforce a resolution but can provide an unbiased opinion. In arbitration, an experienced third party will make a legally binding decision to resolve the dispute.Things that might help to resolve a shareholder dispute include:
- Splitting the business
- Variation of rights (where a party agrees to relinquish control but retains a
level of financial reward) - Share buyback (where the company buys back certain shares and cancels
them) - Director disqualification
- Unfair prejudice petition
- Court action.
Partnership and shareholder disputes
Director and shareholder disputes
Making a shareholder dispute claim
Whatever the nature of your shareholder conflict, our experienced team is well
placed to help. Experts in alternative dispute resolution (ADR) – which allows greater flexibility when it comes to the overall resolution – we seek a satisfactory decision without going to court.
We can organise professional mediation to empower you to resolve the dispute with the help of an impartial third-party, and ensure the decision is made into a legally binding order if agreed. If you prefer a more formal process – especially where things are no longer friendly – we can steer you through the arbitration process to secure afinal and binding decision by a qualified arbitrator.
Where ADR is unsuitable or has failed, we can represent you in court and ensure
you have a robust and winnable case. We always recommend the method of dispute resolution which puts you at the best chance of success.
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With all the skill, expertise, and commercial insight you need to ensure a swift resolution to your shareholder dispute, we remove the burden from your shoulders by delivering the highest standards of care and counsel.
Call us today on 020 7467 3980 or complete the enquiry form, and one of our shareholder dispute lawyers will be in touch to find out more about how we can help.
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