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Shareholder Disputes

Disputes at board level, either between directors or between directors and shareholders, have potentially devastating consequences for businesses. 

In our experience most common causes are breakdowns in personal relationships:

  • a loss of trust and confidence
  • disputes about the direction of the business
  • conflicts of interest

Director and shareholder disputes are the corporate world's equivalent of divorce.  They are often emotive, highly charged and embittered. The issues involved are usually complex and have a long factual history to them. 

Particular scenarios that we come across are:

  • Unfair prejudice claims by minority shareholders. There have been an enormous amount of these claims since the protection was introduced.  Minority shareholders may petition the court where the company's affairs have been conducted in a manner unfairly prejudicial to shareholders of the company or some part of the shareholders.
  • Derivative claims.  Shareholders' rights to bring claims in the name of a company against the directors are now provided for by statute, which allows claims to be brought where there is or is likely to be an act or omission amounting to negligence, default or breach of duty.
  • Removal of a director from office pursuant to the Companies Act.
  • Just and equitable winding up pursuant to the Insolvency Act is a less frequently used remedy than it used to be but may still be appropriate in some circumstances, including situations of deadlock in owner managed businesses.

Our aim is always to bring about a resolution as quickly and as cost effectively as possible to minimise the effect on the business.  Resolution can be achieved in a number of ways and may involve a combination of the following methods:

  • negotiation
  • mediation
  • arbitration
  • expert determination
  • share valuation
  • early neutral evaluation and finally
  • litigation, including where appropriate injunctive relief

Early advice is essential.  By knowing where you stand legally you can negotiate from a position of strength. Importantly you can be advised how your communications and actions may be viewed by a court should settlement not be reached prior to litigation.

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