Disputes between shareholders in businesses are relatively common, and most are easily resolved. It’s not always that simple or easy, however, and disputes can often become more serious and cause problems to the operation of the business.
Avoiding and resolving disputes, then, is absolutely vital to the success of your business.
Some of the most common company disputes concern minority shareholders, who may feel that they are being ignored or overruled due to only having a relatively small share in the company. Minority shareholders have many of the same rights as major shareholders, and prejudice against them can be given a very dim view by the courts.
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Any dispute between company shareholders is often both complicated and highly stressful. And it can prove very expensive indeed. That’s why it’s so important that you get the right legal advice – from an experienced business dispute resolution specialist plenty of experience of company bust ups. Our team have that expertise.
The head of our business dispute team, David Patterson, is a member of the Commercial Litigation Association – the UK’s only group of expert commercial litigation and mediation professionals.
What causes minority shareholder disputes?
Minority shareholders may have a grievance if they feel directors are exceeding their powers, being selective with issues over shares or using company money inappropriately.
If a major shareholder has behaved improperly, a court may allow the minority shareholder to resign his or her position by forcing the sale of shares to the majority shareholder at a price fixed by the court. This is only usually relevant to private companies, as a minority shareholder in a publicly traded company can sell his or her shares on the open market.
Disputes can occur at any level of the boardroom, and major shareholders often come up against disputes with fellow shareholders, but disputes involving minority shareholders can be particularly prevalent and cause heightened feelings of anger and injustice. Unfortunately, it can be the case that major shareholders may feel they can ride roughshod over minority shareholders, seeing them as lesser partners due to their reduced financial input. For a minority shareholder who effectively has the same voting rights as a major shareholder, this may feel unjust and tempers can easily flare.
That’s why forward planning and effective shareholder management is key to avoiding the likelihood of minority shareholder disputes.
Avoiding disputes in the first place – getting the right shareholders agreement
One of the most effective ways to resolve disputes is to anticipate them and plan against them before they happen.
Drawing up a shareholders’ agreement is a vital stage in a company’s formation, although an agreement can be drawn up at any point in order to mitigate against any future disputes which might occur between shareholders.
A shareholders’ agreement is a relatively complicated but very useful document which will outline the rights and responsibilities of all shareholders. It needs very careful wording and there are a number of ways in which you can come unstuck, so hiring a professional, experienced business solicitor is vital to ensuring your shareholders’ agreement is watertight.
An experienced business solicitor will also know what potential pitfalls tend to befall shareholders, and minority shareholders in particular, and will be able to advise you as to what they are and how to try to avoid them, putting measures in place within the shareholders’ agreement which will take account of those possibilities.
Many people choose to avoid legal advice and simply draw up a shareholders’ agreement themselves, but this leaves them wide open to loopholes and a large number of things they may not have anticipated.
The short-term investment in proper, professional legal advice will be very small compared to the potentially huge damages which could be caused by a future disputes between shareholders.
Click here to read more about Shareholders Agreements
Legal advice should also be sought if you are already in the midst of a minority shareholder dispute, as proper resolution and mediation will be key to ensuring the dispute is settled quickly and amicably, enabling the business to carry on with its normal functions without adversely affecting the company itself or any of the shareholders, directors or employees.
When people’s jobs are potentially at stake, a quick resolution should always be sought, and an experienced business solicitor can help you through the potential minefield that is conflict resolution.
Click here to read more about company director disputes
Are You A Minority Shareholder? Involved In A Company Dispute? Call Us Now
If you’re a minority shareholder and have a query regarding a dispute, you need the right advice from experienced business solicitors. Our business dispute team have the experience you need – call us today for FREE initial phone advice and put your mind at rest.
We offer FREE initial phone advice so you can find out where you stand without having to worry about paying legal bills.
- One of our team on FREEPHONE 0800 1404544 or on (01722) 422300
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