Gareth is an expert in commercial and civil law, and he supports businesses and individuals in overcoming legal hurdles.
Whether you need advice, help with a claim you're involved in, or new legal documents, you can rely on Gareth to get the job done.
Shareholder disputes can be some of the most challenging and stressful situations a business owner can face. Imagine pouring your heart and soul into building a successful company, only to find yourself at odds with your business partners over the direction of the enterprise. Maybe there was no clear shareholder agreement in place from the outset, leading to disagreements. Or perhaps a 50-50 ownership structure has resulted in an frustrating deadlock, with neither side willing to compromise. Whatever the cause, these disputes can rapidly spiral out of control, sapping time, money and morale from the business.
In an ideal world, shareholder conflicts would be resolved amicably through open communication and negotiation. After all, maintaining a functional working relationship is crucial for the continued success of the company. However, the reality is that emotions can run high, and the parties may become entrenched in their positions. This is where having one eye on potential legal remedies becomes important. Understanding the options available can strengthen your negotiating position and provide a clear path to resolution if discussions break down.
If a shareholder feels their interests have been unfairly prejudiced by the actions of the majority, they can bring an unfair prejudice petition under section 994 of the Companies Act 2006. This powerful remedy allows the court to intervene and order remedies such as a share buyout or change in company management. An unfair prejudice claim may be appropriate if, for example, the majority shareholders have excluded a minority shareholder from the business, failed to provide them with information, or made decisions that disproportionately benefit the majority.
In cases of deadlock or a complete breakdown of trust between shareholders, the court has the ability to order the company to be wound up on "just and equitable" grounds. This drastic measure may be justified if there is no longer a workable relationship between the owners, and the only way to protect their interests is to bring the company to an end. The court has wide discretion in considering factors such as the understanding between the shareholders and the legitimate expectations they had when joining the business.
Minority shareholders can also take action on behalf of the company itself through a derivative claim. If the directors have breached their duties, causing loss to the company, a shareholder can sue the directors in the name of the company. This can be useful in holding management accountable and preventing further damage to the business. However, the shareholder must show they are acting in good faith and that the claim is in the best interests of the company as a whole.
Ultimately, the best approach is to seek early advice from an experienced commercial lawyer like Gareth. He can help you navigate the complexities of shareholder disputes, explore all available options, and steer you towards a positive outcome - whether that's a negotiated settlement or, if necessary, court action to protect your stake in the business.
Don't let a shareholder conflict jeopardise everything you've worked so hard to build. Contact Gareth today to discuss how he can help.