27th November 2023
Sometimes shareholders simply can’t see eye to eye – so what happens next? Our Commercial Dispute Resolution team takes a look.
We all like to go into business with people who share our ideals, goals and values. However, there may be times when the shareholders of a business simply cannot agree and are unable to produce a majority vote on a key decision. The situation, often referred to as a deadlock, can have serious consequences for a business if not resolved.
What happens if shareholders reach a deadlock?
Deadlock should be avoided if at all possible, and there is often a way through if shareholders are willing to negotiate or compromise. However, if shareholders simply cannot agree then the first course of action should be to refer to the shareholders’ agreement, or the company’s articles.
What are shareholders’ agreements and company’s articles?
These two documents, or sets of documents, detail the rights and responsibilities of shareholders or directors. It is helpful for all limited companies to have these drawn up at the time of shares being distributed, and reviewed each time a new shareholder comes into the fold.
What if we don’t have these documents, or they don’t help us?
Not all companies have the right articles and agreements in place to deal with deadlock – and in this scenario, they will need to reply on other matters to resolve the problem. There are several options, and which one you choose will vary depending on circumstances.
It is recommended that you seek the advice of a commercial dispute resolution specialist before deciding which path to go down. Possible courses of action include:
How can Thrings help?
Prevention is always better than cure, so may need us to review your company articles and shareholders agreement, or draft entirely new ones, to ensure your company is best prepared and protected.
If there is a disagreement among shareholders already, or a disagreement in the offing, we can help you by advising you on your rights under the company documents, any risks with your position, options for taking it forward and how best to manage a dispute. It’s best to act in the early stages wherever possible.
The Thrings Commercial Dispute Resolution team advises shareholders and directors on a wide range of business disputes, and includes specialists in alternative dispute resolution, and litigation. Find out more here.