Shareholder and Boardroom Disputes

When running a company, large or small, shareholders and directors may have different understandings as to the contributions which they should make to the company in terms of time, money and expertise. There may also be differences in the expectations the members have as to what they will be taking out of the company.

This is made more likely by the fact that, in business, many people who set up a company do so with only a minimum of understanding of the rules and of their duties, particularly their fiduciary duties and their obligations under the Companies Act 2006.

If a disagreement arises, there will often be two types of participant to the dispute.

On one hand, a participant who has or can bring to bear a majority of the share voting rights can generally get their own way by organising a suitable shareholder vote.

On the other, a shareholder who cannot do that is in a weaker position. They are not protected by their ability to arrange a successful vote, but they do have protection under the law, particularly the ability to prevent other shareholders from treating them in an unfairly prejudicial way.

We have substantial experience of dealing with boardroom disputes. We understand the interaction between the Companies Act, the general law, the articles of association and the terms of any shareholders' agreement, and we are familiar with the ways in which they should all be handled.

In many cases, the best outcome will be a negotiated exit for the minority shareholder, provided that exit is on suitable terms. The remaining shareholders may decide or be compelled to buy that person's shares back at a proper value.

In other instances, where a compromise cannot be found, litigation will be necessary.

Boardroom and shareholder battles can be extremely damaging and very expensive in terms of disruption to business, lost time and legal fees. We work with clients to ensure that all aspects of that cost are minimised as far as possible, in order to ensure that our clients can put the dispute behind them and continue successfully with their business activities - together or apart.