Shareholder Disputes

The majority of our work is privately paying and we will typically require a payment on account of our fees before commencing work. We do not do legally aided work.

Shareholder disputes can arise for a number of reasons, including a difference of opinion over the direction of the business or how the company should be managed. Disputes can be more common when there is not a clear shareholder agreement in place and/or adequate protections.

Navigating a shareholder dispute requires expertise and finesse, which is why it is imperative that you seek legal advice whether you are a claimant or defendant. We are able to provide well-rounded advice by working alongside our other specialists team, including corporate and employment.

The team at JMW has significant experience in acting for both claimants and defendants in shareholder disputes. To speak to one of our solicitors with expertise on shareholder disputes, please contact us by calling 0345 872 6666, or fill in our online enquiry form to request a call back.

The directors are appointed by the company to act on its behalf shareholders or members as they're often referred to own some or all of the company through their investments. They have an entitlement to sharing the profits of the company. Duty are typically owned by directors rather than shareholders. Director's duties arise from a number of sources So the company's articles, statute, the most obvious example is the company's Act, the requirement, the director acts in the best interests of the company.

There's also common law duties, so duty of confidence and also our fiduciary duty to act in good faith. The articles of association are compulsory company has to have articles, whereas the shareholders' agreement is a voluntary document. The articles bind the company its members, its shareholders and its directors, and there are public documents. The shareholders agreement is a private document, and it's only by the parties to the agreement, typically the shareholders themselves.

So shareholders' rights are typically enacted through their ability to vote at shareholders' meetings. A shareholder with over fifty percent of the shares in in a company can pass of itself an ordinary resolution. More serious decisions are made by way of special resolution which requires over seventy five percent of the shareholders to vote in favor of Well, in the case of minority shareholders, the sorts of examples we tend to see is directors acting in breach of their high judiciary duties, actions being taken which benefit a certain class of shareholders over others in the case of equal shareholdings.

The usual classic problem is a deadlock situation whereby each set of fifty percent shareholders can block an ordinary resolution being passed but can't actively make that decision of themselves and that creates a deadlock situation. Well, these sorts of disputes highlight why it's so important to have a properly drafted set of articles from the outset and also ideally shareholders' agreement in place. Monarch shareholders can issue a petition to the court if they believe that their minority interest has been unfairly prejudiced. Alternatively, a minority shareholder could issue a set of proceedings called a derivative action, which is where the shareholder effectively seeks the court's permission to step into the shoes of the company and take action usually against directors who are acting unlawfully or in breach of their fiduciary duties on the part of the company.

A last resort is also for an application to be made to court for an order for the winding up of the company.

How JMW Can Help

Obtaining legal assistance at an early stage for advice on a shareholder’s rights, and the best options and strategies to follow can be extremely valuable. JMW Solicitors is highly experienced in acting for both claimants and defendants in shareholder disputes, and can advise you on any tactical considerations along with the remedies that may be available in any particular situation.

Some of the ways in which JMW can assist you with your shareholder disputes include:

Acting for either the majority or minority shareholder in unfair prejudice proceedings

Obtaining expert advice in support of the claim or defence - for example, in areas such as a company valuation or investigations into unauthorised transactions

Advising on:

Potential breaches of a shareholder’s agreement

Breach of warranty claims and indemnity claims

Bringing or defending derivative actions

Winding up a company on just and equitable grounds

Any misrepresentation claims

Where negligent advice may have been given in respect of a transaction

JMW's award-winning commercial litigation team has a wealth of experience in representing both minority and majority shareholders to resolve disputes, often without the need for court proceedings. Our approach begins with alternative dispute resolution that aligns with your commercial objectives, and we apply our thorough knowledge of company structures and legal remedies to pursue the best possible outcome.

Meet Our Team of Shareholder Dispute Solicitors

Our shareholder disputes team at JMW provides expert guidance and tailored solutions which aim to resolve conflicts efficiently, protecting your business and avoiding lengthy legal disputes. With many years of experience in remedies ranging from the compulsory sale or purchase of another party’s shares, the just and equitable winding up of a business, through to negotiated settlements and amicable resolutions, we can advise you and deliver the best possible outcome based on your position.

Case Studies

SETTLEMENT SUCCESS IN LONG-RUNNING SHAREHOLDER DISPUTE BETWEEN TWO FAMILY MEMBERS IN RESPECT OF A FARMING BUSINESS

In this case study, JMW successfully resolved a protracted shareholder dispute through skilful negotiation, securing a favourable settlement for our client and avoiding the need for lengthy court proceedings.

JMW OBTAINED A SUBSTANTIAL JUDGEMENT ON BEHALF OF TWO SHAREHOLDERS

JMW achieved a substantial judgment on behalf of two shareholders, ensuring their rights were upheld and securing significant compensation through decisive legal action.

What Are Examples of Shareholder Disputes?

Shareholder disputes can arise because of a number of factors. For example, disputes may arise over:

the management and running of the company (or a shareholder’s exclusion from the management of the company),

a breach of a shareholder’s agreement,

a conflict of interest, or

concerns over potentially fraudulent activities by one or more of the directors.

Disputes can also arise in relation to the sale or purchase of a business. Commonly, disputes occur where one party has breached a term of a share purchase agreement, or the purchaser learns post-sale that warranties provided by the seller were false, and/or where they were misled into entering into the sale or purchase of a business.

Can Alternative Dispute Resolution Help Me?

Depending on the nature of a dispute, JMW will often focus on alternative dispute resolution (ADR). This can support the efficient resolution of disputes, helping to protect your business and avoid protracted legal proceedings. There are several methods available that are appropriate for different types of disputes, and can enable the shareholders involved to reach an amicable resolution, or explore solutions that the court would not have the power to impose. Whilst unfair prejudice petitions are commonly brought under the Companies Act 2006, and the court has wide remedial powers to regulate the company’s affairs or order a share purchase, the court will often encourage ADR in most cases.

Whether a shareholder dispute arises from unfairly prejudicial conduct, valuation disagreements, dividend policy, alleged misuse of company assets, breaches of a shareholders’ agreement, deadlock, information rights, or excessive remuneration among directors, ADR can enable you to achieve the outcome you are seeking. Where possible, JMW's team will always work to ensure that disputes with fellow shareholders do not interrupt company operations, and to resolve matters as early as possible when a dispute arises. The ADR approaches that we may consider for early intervention include:

Negotiation

The shareholders, directors and their lawyers can negotiate directly, whether through informal discussion, by writing letters, in a “without prejudice” meeting, or structured around a term sheet. This is best suited for early-stage disputes where the parties still have trust or where no input is needed from a neutral third party. It can be a flexible approach to cases of a breach of the shareholders' agreement, an information or access dispute, or exit disagreement. Outcomes could include a negotiated settlement, an amendment to the underlying agreement, a new disclosure protocol or share buyout terms. However, if one side withholds information or the discussion becomes emotional, negotiations can stall.

Mediation

In mediation, a neutral mediator facilitates settlement discussions between the parties and their solicitors. The mediator is independent and does not aim to decide which party is correct, but to help the parties to identify interests, risk, costs, and possible settlement structures. The result is binding only if the parties sign a settlement agreement, but it can be flexible and tailored to the specific circumstances. As such, this can be a suitable approach to most shareholder disputes, especially where the parties need a complex solution that could not be crafted by a court.

If the matter concerns the breakdown of a family or quasi-partnership company, mediation can preserve business value and allow for bespoke terms for exits. Similarly, it can allow for financial settlements, negotiated buyouts, disclosures, governance changes and practical restructuring, depending on the desired outcome in response to the dispute.

However, as mentioned, the result is not binding until a settlement is agreed and signed. As such, while this approach can be the fastest way to address non-legal issues and deliver tailored resolutions, it can also narrow issues without fully resolving them. With that said, even if matters proceed to court from this stage, it is often faster and more cost-effective to pursue a resolution after having followed the mediation process.

Arbitration

Arbitration involves holding a private tribunal where usually either one or three arbitrators hear evidence and legal arguments, then issue a binding award. An arbitration clause may be included in the shareholders’ agreement, investment agreement, articles, or joint venture agreement, which means that disputes must be settled using this method.

Because the result is confidential, binding and potentially enforceable internationally, arbitration can deliver a strong resolution to disputes related to confidential matters and legal or factual issues. On the other hand, remedies can affect the company, winding up, or statutory rights, and there is only a limited right to appeal. If you are seeking statutory remedies, especially where court orders are needed against the company or third parties, the matter may still require court involvement. As such, it is important to speak to a solicitor about your options before any arbitration takes place.

Early neutral evaluation (ENE)

In ENE, a neutral evaluator - often a senior lawyer, retired or acting judge, KC, or sector expert - gives a non-binding assessment of the likely outcome if the matter were to proceed to trial. This can happen privately or sometimes through a court process. If parties have unrealistic expectations or are concerned about heavy costs involved in pursuing an unfair prejudice petition, ENE can clarify what to expect and sometimes lead to an early settlement. However, because it does not deliver a binding result, it is usually best pursued as an initial step, with the parties able to determine their approach to a resolution based on an expert perspective.

Remedies for Shareholder Disputes

The remedies available in a shareholder dispute are wide ranging, and what is best to pursue will depend on the nature of the dispute, the company’s constitutional documents, any shareholders’ agreement, and the commercial objectives of the parties. Examples of some of the remedies available to resolve a shareholder dispute include:

A shareholder departing the company with their shares being bought back

Negotiating enhanced protections for shareholders

Management orders which may implement more restrictions on the power of directors and/or imposing specific obligations upon them

The payment of compensation

Restoration of company property

In practice, a negotiated buyout is often one of the most commercially realistic outcomes, particularly where the relationship between shareholders has broken down and an ongoing working relationship is no longer viable. Enhanced shareholder protections or restrictions on directors may be more suitable where the shareholder wishes to remain invested in the business and ensure stronger governance going forward.

The most appropriate remedy will therefore depend not only on the legal merits of the claim, but also on whether the shareholder’s objective is to exit the company, regain influence, protect the value of their investment, or restore proper management of the business. JMW can advise you of the potential options available and explain what you can expect from the legal process.

Talk to Us

JMW's shareholder disputes team has extensive experience in settling shareholder disputes in the best interests of our clients, with commercial awareness and tactical decisions that deliver the outcome you are seeking.

To discuss a potential shareholder dispute with us, simply call 0345 872 6666, or fill in our online enquiry form to request a call back at a convenient time.

Shareholder Disputes