Disputes between Directors are commonplace. However, those disputes can lead to real difficulties where the Directors are also Shareholders. A stalemate can occur which prevents the company from running day to day. That scenario can be avoided by entering into a Shareholders Agreement which will set out how such shareholder disputes are to be resolved. This will minimise the impact upon the company and will enable it to continue to operate. Where there is no Shareholders Agreement it is often necessary to involve the courts. Some of the options available via the courts are:
- Shareholders can bring a derivative claim on behalf of the company against its Directors for negligence, breach of contractual duty or breach of trust.
- Minority Shareholders can bring an unfair prejudice claim.
- Shareholders may seek the winding up of the company on a justice and equitable basis.
Invariably where Court proceedings are necessary the working relationship between the Director/Shareholders will have irretrievably broken down. In those circumstances the parties are best served acknowledging they cannot continue to work together and try to reach an agreement whereby one buys the others Shareholding. Obviously, agreement will need to be reached about the price to be paid and this is not always straightforward. If the parties cannot reach an agreement then they may still wish to consider mediation or some other form of Alternative Dispute Resolution before they involve the courts.
Gepp Solicitors can assist you with both the drafting of a Shareholders Agreement, hopefully to avoid a dispute arising, and with resolving a dispute once it has arisen.
If you require any further guidance on this matter, please feel free to contact Justin Emerson on 01245 228113 or firstname.lastname@example.org
This is not legal advice; it is intended to provide information of general interest about current legal issues.