In all companies, there are times when the shareholders and directors of the company may experience frustration or an imbalance of control, which can lead to disputes between the various parties.
At Francis Wilks & Jones, we frequently act for shareholders and companies in dispute for a variety of reasons. These can arise between shareholder and company, or business owners who are sharing the shareholding and the running of the company as directors, or any number of possibilities. Trading a company can be very stressful. When all parties are working hard to bring the company to profit, particularly in times of financial hardship, then sometimes disputes will arise.
There is often an imbalance of control in a company from the outset, which can cause resentment. There will be some shareholders with minority shares and rights, compared to majority shareholders, who have greater control.
Minority shareholders particularly find that they are often thwarted because they don’t have sufficient shares to control the company’s affairs. If they are unable to resolve a matter then they might need to consider either their rights and remedies, or an exit from the company.
If a shareholder feels that their only option is to exit, then depending on the company this may bring about its own areas of dispute. The valuation of the shares may be contentious, and there may also be rights of first refusal to sell the shares to existing shareholders, potentially with a devaluation if there is a minority interest discount involved.
Directors are bound by various duties to act in the best interest of the company. These are far reaching and breaches can be penalised.
Once a company or shareholders have taken proceedings against a director for breach of duty, this can often mean the end of the relationship. That director or shareholder may wish to leave the company, selling their shares, or it may be that they are forced to exit by a court order.
There is a risk then that that director sets up a new company with all the knowledge that they have gained from the company.
- if directors have their employment contract terminated when they are removed as a director, the company will need to make sure that they follow employment procedures as well as company law requirements,
- this is not only by way of voting the director out, but also by ensuring that their employment contract or the terms of their employment allow for the director to be removed properly.
There are several remedies open to shareholders who believe that the company is not being run properly and in accordance with corporate governance, or who have a falling out with the company, or who believe that the directors are acting contrary to the company’s best interests.
At Francis Wilks & Jones we have many years of experience advising companies, business owners and directors in areas of dispute. If you have areas of dispute with your company or shareholders, contact us to discuss how we can help you. The most common areas for you to be concerned with in terms of remedy following disputes are likely to be the following:
- negotiating a new or amended shareholder agreement;
- removal of director;
- sale of shareholding or business;
- company action against directors;
- unfair prejudice & section 994 petitions;
- section 221 derivative claims;
- just and equitable winding up;
- solvent winding up.
At Francis Wilks & Jones you will always speak to someone at a senior level who will respond to any query you have immediately. Please call any member of our team for your consultation now or e mail us with your enquiry and we will call you back at a time convenient to you.