Shareholder Dispute Lawyers
Shareholder disputes can significantly impact a business. When shareholders, especially those who are also directors, find themselves at odds, it can create stress and uncertainty. If not managed well, these disputes can drain resources, cause tension in the company, and harm its reputation in the eyes of stakeholders and the public.
Shareholder disputes can range from minority shareholders feeling sidelined to disagreements over the company’s management or direction. Delaying the resolution of shareholder disputes only drags out the uncertainty and increases the risk of further damage to the business.
At Lawhive, our network of experienced corporate lawyers specialise in resolving shareholder disputes.
Contact our Legal Assessment Team today to learn more about how we can help you and get a free fixed-fee quote for the advice and support of a specialist solicitor.
What is a shareholder conflict?
Shareholder conflicts happen when shareholders (people who own parts of a company) can’t agree on something (for example, where the company is headed, how it’s managed, or financial matters).
As shareholders have a stake in a company, naturally they care about how it’s run. Shareholder disputes can involve any shareholder, or sometimes company directors.
What is an example of a shareholder dispute?
Shareholder disputes come in all shapes and sizes, depending on the company.
Sometimes, the majority shareholder wants to do something, but the minority shareholders disagree. Or, it’s the other way around, and the minority shareholder feels pressured by the majority to go along with something they’re uncomfortable with. Some companies end up in a deadlock when shareholders can’t agree on anything.
Here are a few examples.
Breach of director’s fiduciary duties
When a director doesn’t put the company’s interests first, it can lead to shareholder disputes and even legal claims against them. This might happen if a director misuses company assets or directs business away from the company.
A director may also breach their fiduciary duties if they don’t follow the company’s rules or break the law under the Companies Act 2006.
Shareholder oppression
When shareholders think directors aren’t treating them fairly, it can lead to disputes about who’s on the board, how much directors get paid, who gets the profits, business deals, voting rights, and selling shares.
Disagreements on company strategy
Shareholders and directors sometimes have different ideas about where the company should go next. This can cause disagreements, especially on major moves like selling the company, merging with another, or making big investments.
Breach of Shareholder Agreement
If a shareholder breaks or threatens to break the rules outlined in the shareholder agreement, it can spark a dispute.
What happens when shareholders disagree?
When shareholders clash, it can throw a business off course. The dispute can become all-consuming, distracting executives from their everyday duties. Sometimes, both sides dig in, leading to a deadlock where no decisions can be made.
There are different ways to resolve a shareholder dispute, some of which can be straightforward, like checking the shareholders’ agreement or the company’s articles of association. As these documents outline the rights and duties of both shareholders and directors, they can often point you in the right direction.
In more complex or contentious cases, other routes to solve a dispute can include Alternative Dispute Resolution or going to court - although that should be a last resort.
What are my rights as a shareholder?
As a shareholder, you have rights under the Companies Act 2006, but these can differ based on how much of the business you own and the type of shares you have. Basic shareholder's rights include the right to:
Know when there’s an annual general meeting or extraordinary general meeting, and attend if they want.
Request a copy of the company’s annual report and accounts.
Check the company’s articles of association to see if they have any extra rights
Look at the Directors’ Service Agreements, indemnity provisions, records of decisions, and minutes of meetings.
Petition for the winding up of a company and get some of the money back if the business closes providing there is money left over after the company has paid off any debts it owes to others
Petition the court if the company is being run in a way that is ‘unfairly prejudicial’ to shareholder interests.
Make a claim against the directors on the company’s behalf relating to director negligence, default, breach of duty, and breach of trust.
A company’s articles of association and a shareholder’s agreement can grant shareholders more rights, but can’t take their basic rights away,
How do you resolve a shareholder dispute?
Ignoring a shareholder dispute can lead to costly legal battles, deadlocks, or even the collapse of a company.
The first step in solving shareholder disputes is open and informal negotiations, alongside consultation of the shareholder’s agreement and the company’s articles of association.
If these documents don’t help, shareholders can call a general meeting to discuss the issues, but they must hold at least 5% of the company’s voting rights. Another option is to appoint a neutral outsider, like a non-executive board member, to mediate and find common ground.
When shareholders are deadlocked because they all have the same share percentage, there are a couple of options. One may be adjusting voting percentages to break the tie. Another option is a shareholder buyout, where other shareholders agree to buy out the ones who are unhappy at a price everyone can settle on.
If internal resolution isn’t possible, legal intervention may be needed. Getting a solicitor involved in these cases early on is wise, as shareholder dispute law can be complex, and do-it-yourself attempts could worsen the situation.
Litigation (going to court) should be the last resort following negotiation or alternative dispute resolution, like mediation.
Do I need a solicitor for a shareholder dispute?
There is no legal requirement to appoint a solicitor during a shareholder dispute, however, they can help you through the process more smoothly, achieving a faster resolution.
A solicitor can:
Save you time and money
Provide legal advice
Prevent errors from damaging the business
Make sure any decisions are legally binding
Act as a mediator between parties
How can Lawhive help?
If you're caught up in a shareholder dispute, our network of corporate lawyers is here to help. They’ll guide you through your rights under the company documents, evaluate any risks you may face, and explore the best options for moving forward in your favor.
Our network of specialist lawyers brings years of experience in advising shareholders and directors on a wide range of business disputes. Including support with alternative dispute resolution and litigation, tailored to your specific circumstances.
For further details, request a callback from our Legal Assessment Team and receive a free quote for the services of a specialist lawyer.