A shareholder dispute is a disagreement between shareholders, directors or business owners concerning the ownership, management or operation of a company.
Shareholder disputes are particularly common in private companies where shareholders are actively involved in running the business. When disagreements arise, they can affect decision making, business performance and relationships between key stakeholders.
Understanding the nature of a shareholder dispute and getting legal advice at an early stage can help minimise disruption and protect the future of the business.
Why Do Shareholder Disputes Occur?
There are many reasons why shareholder disputes arise.
Common causes include disagreements regarding business strategy, profit distribution, director conduct, company finances, voting rights and the future direction of the company.
Disputes may also occur where shareholders believe that company decisions have been made unfairly or that their interests have been ignored.
In owner-managed businesses, personal relationships often play a significant role, meaning commercial disagreements can quickly become personal disputes.
What Rights Do Shareholders Have?
Shareholders benefit from a range of legal protections under company law.
Their rights may arise from:
- The Companies Act 2006.
- The Articles of Association.
- Shareholders Agreements.
- General principles of company law.
The extent of these rights will depend on the company’s structure and the shareholder’s ownership position.
Where rights have been breached, legal remedies may be available.
What Legal Remedies Are Available?
The appropriate course of action will depend on the facts of the case and the circumstances giving rise to the dispute.
Potential options may include:
- Negotiated settlements.
- Mediation.
- Shareholder buyouts.
- Enforcement of Shareholders Agreements.
- Unfair prejudice petitions.
- Court proceedings.
Many disputes can be resolved without litigation if legal advice is taken at an early stage.
How IMD Corporate Can Help
At IMD Corporate, we advise shareholders, directors and business owners on all aspects of shareholder disputes.
Our commercial litigation team provides strategic advice aimed at protecting your interests while helping you achieve the most effective commercial outcome.
If you are involved in a shareholder dispute or require advice regarding shareholder rights, contact IMD Corporate on 0330 107 0106 today.
