Shareholder Dispute Lawyers London, UK | Hudson McKenzie
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Shareholder Dispute Lawyers London

The ability for shareholders to operate together to progress a business is vital. However, when trust between these individuals breaks down, the dispute can have significant adverse effects on the success of the business. In order to appreciate the technical nature of shareholder disputes, it is necessary to understand the legal concepts and remedies available.

What is the Legal Position of Shareholders?

Although directors are responsible for the day-to-day running of the company, shareholders control the decisions. By instructing the board of directors, shareholders are able to steer a company in the desired direction.

However, this power operates on a majority basis and does not assist a minority shareholder who disagrees with the majority. In this case, a shareholder has some remedies available through law depending on their circumstances.

Dispute Guidelines

Guidance for resolving disputes should be set out within the company’s articles of association or a shareholders’ agreement. Anticipating possible and typical disputes may save shareholders time, money and effort.

Articles or agreements normally call for dispute mediation in the first instance. This involves discussions through an independent and neutral party to negotiate towards a solution that protects business interests.

Should mediation provide unsuccessful, the articles or agreement may provide guidance for the shareholders to dissolve their relationship. Normally, these legal mechanisms include the option to require others to buy a shareholder out at a fair price or each party making offers for the others shares, the highest price winning the right to purchase.

Statutory Rights of Shareholders

Statutory rights are regulations provided by law and apply regardless of individual circumstances or agreements. Shareholders may use these in the context of a dispute. They include the right to inspect the company register and to require the company to call general meetings. Disputes may be addressed and mitigated if brought into a public forum and discussed at a shareholders meeting.

Personal rights of shareholders

Shareholders also have personal rights they may enforce. These include:

  • The right to enforce rights within the articles or agreement,
  • The right to object to an improper amendment to the articles,
  • The right to bring an action to prevent a transaction that is outwith the power conferred by the articles.

Additionally, a shareholders agreement may also have remedies that are enforceable. Should these mechanisms not resolve a dispute then a minority shareholder has the following options:

  • Evaluate whether they may be entitled to bring a claim on behalf of the company (for example, due to director impropriety),
  • Seek to enforce statutory protection afforded to minority shareholders. Under s.994 of the Companies Act 2006, a shareholder may petition the court where the affairs of the company are being conducted in a manner that is unfairly prejudicial to all or part of its members.

The appropriate remedy is highly dependant on the facts of the individual dispute.

Reason for disputes

Disputes escalate because parties don’t understand their shareholder’s rights and how to use these to reach a solution to conflict. Receiving legal advice from an early stage may save significant time, energy and resources and, ultimately, may rescue the collapse of the enterprise.

As has been discussed, the law relating to shareholder disputes is a highly technical and complex area. Boardroom disputes revolve around individual facts, and they can be won or lost depending on whether experienced legal advice has been sought at the earliest opportunity. Hudson McKenzie offers a personal and responsive service for navigating this complex area of law. With significant experience in company law and a reputation for swift and approachable expertise, Hudson McKenzie is well equipped to help resolve boardroom battles.

Contact our Shareholder Dispute Solicitors London, UK

For further information, please contact our shareholder dispute lawyers in London – click here or call us on +44 (0)20 3318 5794.