The leadership of companies usually consists of two groups – directors and shareholders – often with some overlap in private businesses. When relationships between those key stakeholders break down, the consequences can be significant for both the business and those involved.
Director and shareholder disputes can arise for many reasons. It could be that a director goes rogue and acts in their own interests, while at the other end of the spectrum it could be a deadlock caused by disagreements over the future direction of the business.
Within those extremes sit a wide range of conflicts between majority (controlling) and minority shareholders, or allegations that directors have breached their obligations or failed to act in the company's best interests.
In some cases, the company's Articles of Association or a Shareholders' Agreement will contain mechanisms to resolve disputes, such as deadlock provisions or agreed exit arrangements. Early professional intervention can also repair commercial relationships before positions become too entrenched.
In other cases, however, the only practical solution is for one party to exit the business. Family-owned companies often present additional personal and emotional challenges, requiring careful, sensitive handling alongside robust legal advice.
When should you seek legal advice?
Obtaining specialist legal advice at an early stage can help directors and shareholders understand their legal position, protect their interests and explore practical solutions before a dispute escalates. Where an agreement cannot be reached, court proceedings may become necessary, including claims for unfair prejudice under section 994 of the Companies Act 2006.
Can Director and Shareholder Disputes be resolved without court proceedings?
Thrings' Commercial Dispute Resolution team advises directors, shareholders and companies on all aspects of director and shareholder disputes.
Wherever appropriate, we encourage the use of alternative dispute resolution (ADR) to achieve an agreed solution to avoid the cost and uncertainty of litigation. This can be before or after the issue of court proceedings.
ADR may include mediation with an experienced independent mediator and expert determination, particularly in share valuation disputes. Where an agreed exit is reached, we work closely with our Corporate and Employment teams, together with independent business valuation experts, to implement the agreed solution efficiently.
