Shareholder and Partnership Disputes

A shareholder dispute occurs when there is a conflict between shareholders in a company. These disputes can arise over various issues, such as disagreements about company management, dividend distribution, or breaches of shareholder agreements.

Common causes include:

• Disagreements over the company’s direction or management
• Conflicts over dividend payments or profit distribution
• Breaches of shareholder agreements or company articles
• Disputes over the sale or transfer of shares
• Allegations of misconduct or fraud by directors or other shareholders

Disputes can be resolved through several methods, including:

• Negotiation: Direct discussion between parties to reach a settlement
• Mediation: Involves a neutral third party to facilitate a resolution
• Arbitration: A formal process where an arbitrator makes a binding decision
• Litigation: Taking the dispute to court, which can be costly and time-consuming

• Review the company’s articles of association and any shareholder agreements to understand your rights and obligations
• Document all relevant communications and decisions related to the dispute
• Seek professional legal advice to understand your position and options
• Consider alternative dispute resolution methods before pursuing litigation

A shareholder agreement is a contract between shareholders that outlines their rights, responsibilities, and the mechanisms for resolving disputes. It is important because it helps prevent disputes by clearly defining the terms of shareholder relationships and can provide a framework for resolving issues that arise.

Yes, a shareholder can bring a derivative claim if they believe that the directors have acted in a way that is prejudicial to the company. This claim is brought on behalf of the company, not the individual shareholder, and must show that the directors have acted improperly.

The Companies Court, part of the High Court of Justice, handles complex company law matters, including shareholder disputes. It can issue orders, grant relief, or make decisions on matters such as unfair prejudice or breaches of company law.

Unfair prejudice occurs when a shareholder’s interests are harmed in a way that is unfair or unreasonable, often due to the actions of other shareholders or directors. Under the Companies Act 2006, shareholders can petition the court for relief if they believe they are being unfairly prejudiced.

The duration of a shareholder dispute depends on various factors, including the complexity of the issues, the method of resolution, and the willingness of parties to negotiate. Disputes resolved through negotiation or mediation may be settled relatively quickly, while litigation can take months or even years.

Costs can vary significantly depending on the resolution method. Mediation and arbitration are generally less expensive than litigation, which involves court fees, legal representation, and other associated costs. It’s important to consider the potential costs and benefits of each method before proceeding. Find out more about our costs here.

Yes, you can reduce the likelihood of future disputes by:

• Creating a comprehensive shareholder agreement that clearly outlines rights and responsibilities
• Regularly reviewing and updating company documents and agreements
• Fostering open communication among shareholders and management
• Seeking legal advice when making significant decisions affecting the company