A dispute between shareholders is hugely disruptive to a business. It is, therefore, important to recognise when a dispute is occurring and take early advice on the rights and remedies available. Our dispute resolution solicitors and experts can help.
The first step is to review any shareholders’ agreement and the company’s articles of association. These documents may include rights that can be enforced by a shareholder.
A shareholders’ agreement may also contain a dispute resolution clause which may set out the method by which the parties have agreed to try to resolve any dispute that has arisen.
The next step is to consider any alternative and/or additional remedies that may be available.
Unfair prejudice petition
A shareholder may issue an unfair prejudice petition pursuant to section 994 Companies Act if the company’s affairs have been conducted in a way that has unfairly prejudiced the shareholder’s interests. This could be, for example, a failure to pay reasonable dividends, misappropriation of company assets, improper allotment of shares or a failure to provide information.
In cases where there is deemed to be what is known as a ‘quasi partnership’, there will be additional considerations that might give rise to a claim.
Derivative claim
A derivative claim is a claim that can be brought by a shareholder in the name of the company against the directors and/or third parties responsible for certain categories of alleged wrongdoing.
Once the derivative claim has been issued at court, the court’s permission must be sought before any further steps in those proceedings can be taken.
Just and equitable winding up
Pursuant to section 122 (1) (g) Insolvency Act 1986, a company can be wound up by the court if “the court is of the opinion that it is just and equitable that the company should be wound up”.
The shareholder applying for the order must have sufficient interest in any winding up and must usually have held the shares for at least 18 months.
Alternative dispute resolution
Once the rights and remedies have been considered, it would be advisable to consider whether alternative dispute resolution methods, such as mediation or expert determination could achieve an efficient and cost-effective resolution.
A dispute between shareholders is hugely disruptive to a business. It is, therefore, important to recognise when a dispute is occurring and take early advice on the rights and remedies available. Our dispute resolution solicitors and experts can help.
The first step is to review any shareholders’ agreement and the company’s articles of association. These documents may include rights that can be enforced by a shareholder.
A shareholders’ agreement may also contain a dispute resolution clause which may set out the method by which the parties have agreed to try to resolve any dispute that has arisen.
The next step is to consider any alternative and/or additional remedies that may be available.
Unfair prejudice petition
A shareholder may issue an unfair prejudice petition pursuant to section 994 Companies Act if the company’s affairs have been conducted in a way that has unfairly prejudiced the shareholder’s interests. This could be, for example, a failure to pay reasonable dividends, misappropriation of company assets, improper allotment of shares or a failure to provide information.
In cases where there is deemed to be what is known as a ‘quasi partnership’, there will be additional considerations that might give rise to a claim.
Derivative claim
A derivative claim is a claim that can be brought by a shareholder in the name of the company against the directors and/or third parties responsible for certain categories of alleged wrongdoing.
Once the derivative claim has been issued at court, the court’s permission must be sought before any further steps in those proceedings can be taken.
Just and equitable winding up
Pursuant to section 122 (1) (g) Insolvency Act 1986, a company can be wound up by the court if “the court is of the opinion that it is just and equitable that the company should be wound up”.
The shareholder applying for the order must have sufficient interest in any winding up and must usually have held the shares for at least 18 months.
Alternative dispute resolution
Once the rights and remedies have been considered, it would be advisable to consider whether alternative dispute resolution methods, such as mediation or expert determination could achieve an efficient and cost-effective resolution.
