logo

What are my rights in a dispute with another director or shareholder?

Get in touch

What are my rights in a dispute with another director or shareholder?

Many private companies start life informally and over time differences can emerge between the directors and/or shareholders. This can happen, for example, if one shareholder is not pulling their weight, is taking too much out of the business or is diverting business or opportunities to a new business which they intend to join/establish.

In an ideal world the shareholders (and the directors) would agree a Shareholder’s Agreement early in the life of the business which would provide for when decisions must be made unanimously, voting rights and provisions attaching to the transfers of shares and distributions via dividends.

In many cases, for various reasons, no such agreements are in place, the position then is governed by the Companies Act 2006 and the normal rule is that a simple majority of shareholders can remove a director from office. However, if that director is also an employee this can ultimately give rise to dismissal claims.

What about minority shareholders?

A minority shareholder who holds less than 50% of the shares is in a relatively weak position as he is unable to control the board. If the shareholder has complaints about how they are being treated (for example being excluded from management) they may be able to apply to the Court for relief on the ground that the affairs of the company are being conducted in a manner that is unfairly prejudicial to them. This is referred to as a claim under Section 994 of the Companies Act 2006. In some cases, they may also be able to bring an action in the name of the company (referred to as a derivative action) against the directors.

Boardroom disputes can be complex and involve both Employment Law and Company Law issues. To access the position, you should consider the Articles of Association, any Shareholder’s Agreements, board minutes, and employment contracts. By understanding where you stand with these, you may be able to resolve the situation using board control or a shareholder’s resolution. If not, careful consideration needs to be given to director’s duties, shareholder’s rights, and employment rights.

In such a case, legal advice should be taken and the earlier this can be done the greater the chance of managing the position without recourse to the Courts.

If you need to speak a specialist solicitor who deals with director/shareholder matters, please contact Aaron Marshall on 01204 377600. Alternatively, you can send an email with your name, contact information and brief details as to the nature of your issue to disputeresolution@afglaw.co.uk and one of our team will be able to help you.

WHO IS GOING TO HELP YOU?

Dispute Resolution

Our dispute resolution team can help you with a full range of legal services.

 

Contact disputeresolution@afglaw.co.uk for further information or call us on 01204 377600

Not sure what you need?

Picking up the phone to one of our team will not commit you to taking things forward. We are happy to have an initial, totally confidential conversation with you and go from there.

Give us a call

  • Bolton 01204 377600
  • Bury 0161 359 3880

Or send us an email

Award-winning legal services

We offer a full range of legal services for individuals and businesses alike.

Many of our services are provided UK-wide, with our physical offices located in Bolton and Bury.

“Just a quick note to say an absolute massive
thank you for my sale and purchase of my new home.
You have all been brilliant and made my move stress free. The fun starts today!”

Suzanne Edmonds

Greg French, Abigail Leavitt and Bernadette Lambert

Let us help you

News