Shareholder Dispute Solicitors

Individuals can find themselves involved in a business in a number of capacities, be it as a shareholder, director or an employee of the company. Frequently, there will be multiple shareholders and directors of the company, which can often lead to disagreements and disputes.

Having multiple stakeholders can unfortunately lead to conflict between competing interests. These can range from disagreements regarding the day-to-day running of the business, to major financial decisions. When this happens, it’s important to have the support of experienced shareholder disputes solicitors, as without the correct intervention, these situations can quickly spiral out of control.

Our shareholder dispute solicitors are experts in this field and are available to guide you through the process of whatever shareholder dispute related issue you are facing. Our team has years of experience dealing with these matters and helping to resolve shareholder disputes, as well as providing an efficient and professional service.

What rights do I have as a shareholder?

There are a number of factors that need to be considered in any dispute. As a shareholder, you will have numerous contractual rights (set out in the company’s Shareholders’ Agreement, if you have one) and statutory rights.

As a shareholder, you are likely entitled to ensure that your name is accurately recorded in the company’s register of members. Additionally, you may possess the right to review and acquire copies of company documents, records, and registers, subject to providing reasonable advance notice. The inspection of these documents is accessible to members without incurring any fees.

What rights do I have as a company director?

As a director, you will have various contractual and statutory duties. These will be set out in your Director’s Service Agreement, if you have one.

In addition to the above, you will also need to consider any employment rights that the relevant parties may have.

What happens if shareholders disagree?

A shareholder dispute can sometimes be quickly resolved through a shareholder’s agreement. However, should this fail, alternative methods are typically required, such as private negotiation, mediation, arbitration and sometimes even court proceedings. The latter is not normally recommended, however, due to it being far more expensive, time-consuming and its ability to produce negative publicity.

Private negotiation involves shareholders working collaboratively in order to find a resolution, often with legal advisors present to provide guidance during and after negotiations.

Mediation revolves around a qualified mediator who acts as a neutral third party to help facilitate a mutually beneficial agreement. Arbitration allows shareholders to submit their case to a trained arbitrator for assessment. This shares similarities with court proceedings but is much less expensive and time consuming.

In the situation where none of the above produce the desired resolution, court proceedings may become unavoidable. Whilst we always do our best to avoid litigation, our shareholder disputes solicitors are happy to provide representation in court, working diligently to secure you the best outcome possible.

How do you resolve shareholder disputes?

Ideally, there should be measures in place that provide a framework for how any disputes between shareholders should be dealt with, this would normally be laid out within a shareholder’s agreement. This is always a good idea as having these policies in place can reduce or even eliminate any confusion surrounding how the issue should be handled.

However, in a situation where there is no framework it is crucial that you seek legal advice as soon as you become aware of potential issues arising amongst your company’s shareholders due to the complicated technical aspects involved in this area of law.

Before any disputes escalate, it’s important to consider various factors, such as any shareholder’s agreements that are in place that may clarify who holds overall control of the board. This is because some companies deviate from the more traditional models and grant shareholders significant decision-making power.

As a director, it is crucial that you act in the company’s best interests as well as comply with legal obligations to avoid personal consequences, such as financial losses or even imprisonment. As a director, it is also important that you don’t assume automatic control over your shareholder meetings, instead, you should examine the relevant documentation and speak with experienced shareholder dispute solicitors to get a better understanding of the company’s structure and the majority needed for shareholder decisions, outlined under the Companies Act 2006.

What is an unfair prejudice petition?

Unfair prejudice commonly emerges when one or more minority shareholders face detriment due to a majority shareholder, often in situations where the latter also holds control within the board. This high level of control (and frequently the absence of safeguards like a shareholder agreement or appropriate amendments to the company’s articles of association) can lead to the company being operated primarily for the benefit of the majority shareholder, disadvantaging the minority shareholders. When a court determines that a company’s actions have harmed shareholders, a common resolution involves ordering the other shareholders to acquire the claimant’s shares at a fair value. Unfair prejudice claims often take on a deeply personal nature. As with other forms of disputes, reaching a negotiated settlement is frequently preferable to pursuing a trial.

What difference does it make if my company is a quasi-partnership?

The formation of a company can have a large impact on how a court will handle conflicts amongst its shareholders, especially for smaller businesses. This can provide advantages for minority shareholders, so it’s crucial to have a good understanding of the nature of quasi-partnerships when faced with a dispute.

In the UK, many small businesses are recognised as ‘quasi-partnerships’, signifying that they function as compact partnerships between a limited group of individuals.

This differentiation is important due to the fact that despite having the same structure as a limited company, quasi-partnerships are managed differently as if they were partnerships amongst those who lead the company.

These businesses often started as partnerships and later were transformed into limited companies or Limited Liability Partnerships (LLP). Another instance would be a family-operated business. It’s important to note here that courts usually lean towards granting specific additional rights and safeguards to minority shareholders in companies that meet the criteria for being quasi-partnerships, which can be advantageous in certain situations.

What rights does a 50% shareholder have?

There are several rights and privileges that a 50% shareholder normally holds within a company, however, this can vary depending on a company’s structure and specific longstanding agreements. The rights that a 50% shareholder may possess are:

Voting rights

A 50% shareholder typically has an equal say in company decisions, especially for matters that require shareholder approval. These matters may include mergers, changes in the company’s articles of incorporation and any significant transactions.

Board representation

A 50% shareholder can have the right to nominate or elect board members, subject to their company’s agreements.

Access to information

Most shareholders typically have the right to access company information including financial statements.

Inspection rights

Shareholders often retain the right to inspect corporate records, books and other documents in order to ensure transparency and accountability within the company.

Dissolution and liquidation

In certain cases, a 50% shareholder might have the ability to initiate proceedings for the dissolution and liquidation of the company, though this can be subject to legal and procedural requirements.

Dividends

A 50% shareholder is typically entitled to receive dividends in proportion to their ownership stake when the company distributes profits to its shareholders.

Can shareholders take directors to court?

Shareholders have the right to take directors to court in certain situations, such as if directors are found to have breached their duties, have engaged in fraudulent activities, mismanaged company assets or behaved in a manner found to be detrimental to the company’s interests. In these circumstances, shareholders may take legal action against directors. It’s important to understand, however, that shareholder litigation against directors can more often than not be very complex and requires complicated legal considerations and procedural requirements.

Due to this, it’s important to consult with an experienced shareholder disputes solicitor beforehand to assist in guiding you through the process.

How our director and shareholder dispute solicitors can help

Shareholder disputes can easily prevent the business from operating as efficiently as normal. By seeking legal advice early on, from one of our specialist commercial dispute solicitors, you can mitigate any damage caused to the business. Our expert lawyers will work diligently to help you reach an early settlement in an amicable way before the relationship breaks down irrevocably.

Our commercial dispute solicitors advise business owners across the UK from our offices surrounding Bristol and South Gloucestershire, in Bedminster, Bishopston, Bristol city centre, Kingswood and Thornbury.

For practical advice, speak to our shareholder dispute solicitors on 0117 325 2929 or complete our online enquiry form.