Resolve your Company and Shareholder Disputes

Home / Our Legal Services / Civil Litigation / Resolve your Company and Shareholder Disputes

Having disagreements with shareholders is a normal part of business and these can arise for a number of reasons, the most common being having a fall out over the management or direction of a company, personal problems souring relationships, conflict of interest or values, or shareholders not pulling their weight.

Broadly speaking the management team of a company is split into two groups, directors and shareholders. Directors are responsible for the day to day running of the business under a fixed term contract. Shareholders are the owners of the company and have voting rights at general meetings to determine important decisions.

A shareholder can also be a director. In small businesses shareholders are commonly also directors.

Removal of directors by shareholders

The ability to remove a director from his office is the ultimate sanction shareholders have against a director. Under s.168(1) Company Act 2006, a company (i.e. the shareholders) may by ordinary resolution remove a director before the expiration of his period of office, notwithstanding anything in any agreement between the company and that director.

Under s.168(2) Company Act 2006 special notice is required of a resolution to remove a director.

Technically, shareholders can remove any director they want as long as at least 50% plus 1 of the votes vote in favour. Statute does not have a set list of reasons to remove a director, that decision is up to the shareholders.

Director’s rights to protest removal

Directors have the right to protect their removal. Directors can set out reasons why he feels he should not be removed in writing and have that memo circulated to all members of the company before the general meeting takes place. If the representations are not circulated, they should be read out at the general meeting.

The director has a statutory right to be heard i.e. to speak in his defence at the general meeting, whether or not he is a shareholder (s.169(2) CA 2006).

In the situation where a director leaves or loses his position, the company may wish/agree to pay him compensation for loss of office due to the specific circumstances involved.

Unfair Prejudice

Section 994 of the Company Act 2006 allows a shareholder to bring an action on the grounds that the company is being run in such a way that he or she has suffered unfair prejudice.

Unfair prejudice may arise where directors are granting excessive remunerations to themselves, or withholding dividend payments to shareholders. In these situations shareholders can apply to the court for an order on two grounds

If the application to the court succeeds the court will order the following relief to be given-

regulate the conduct of the company's affairs in the future to refrain from doing or continuing an act complained of, or to do an act that the petitioner has complained it has omitted to do;
authorise civil proceedings to be brought in the name and on behalf of the company by such person or persons and on such terms as the court may direct;
require the company not to make any, or any specified, alterations in its articles without the leave of the court;
provide for the purchase of the shares of any members of the company by other members or by the company itself and, in the case of a purchase by the company itself, the reduction of the company's capital accordingly.

The success rate of unfair prejudice is extremely low. If you want to hold directors accountable it is recommended that you speak to a solicitor familiar with company and corporate law.

Just and Equitable Winding Up

The right for a disgruntled shareholder to apply for the company to be wound up on the grounds that it is just and equitable to do so arises under s.122(1)(g) Insolvency Act 1986.

This is a drastic solution because it means the company will be brought to an end. If you are applying for a winding up it is the courts discretion to approve.

Why Instruct OneLaw Chambers for your Civil Litigation Case?

At OneLaw Chambers, our civil litigation solicitors and barristers regularly assist with many contentious civil litigation cases. We have assisted and represented many clients from all over the world achieving successful outcomes for them

OneLaw Chambers has defended the interests of successful individuals, businesses and brands for many years, pursuing matters swiftly and robustly where necessary. With a dedicated team of Civil Litigation Solicitors and Barristers, OneLaw has an established dispute resolution practice acting in complex multi-jurisdictional disputes and is well known in the art, sport, fashion and luxury assets sectors. Specialisms include international arbitration, public international law, tax controversy, media and reputation management, employment and regulatory, professional negligence, board and shareholder disputes, insolvency and fraud.

Our Civil Litigation Solicitors and Barristers fiercely and tenaciously represent you in putting forward the strongest possible case, ensuring that you are always satisfied with the manner in which we represent you and that a successful outcome is achieved in your case without significant cost and expense to you.

We are committed to ensuring that our Civil Litigation Solicitors and Barristers prepare every civil litigation case with utmost quality and skill so that successful outcome is achieved every time. Our Civil Litigation Solicitors and Barristers operate in a friendly and cooperative manner to provide our clients with the best client care and service during the entire civil litigation process.