Solicitors Specialising in Disputes Between Shareholders
Disputes between people are a common fact of life, and are especially common when money is involved. It should come as no surprise then, that business disputes between company shareholders happen relatively frequently, and occasionally reach a level which requires legal intervention.
But aoiding and resolving disputes, then, is absolutely vital to the success of your business.
Our Solicitors represent shareholders in company disputes both locally in Wiltshire, Hampshire, Dorset and Somerset – and throughout England and Wales – from our offices in Salisbury, Andover, Fordingbridge and Amesbury.
Stuck in a Shareholder Dispute? Need to know where you stand? For FREE initial legal advice simply call our Solicitors now on FREEPHONE 0800 1404544 or Salisbury 01722 422300.
Shareholder Disputes – Our Business Litigation Specialists
Commercial disputes can be complex and very stressful. That’s why you need experienced dispute resolution specialist on your side.
Arguments between shareholders can be both complex and can prove very expensive to solve. That is why it’s critical, that the solicitors you appoint have the right experience. Our team have the expertise you need. And we can help you with a range of solutions to your shareholder dispute – from negotiation and mediation to emergency commercial injunctions.
Common causes of shareholder disputes
Among the disagreements between shareholders which our team come across most regularly are the following:
• The direction and strategy of the company — Occasions when shareholders disagree about the direction the company is taking.
• Dividends — Disagreements over the frequency or amount of dividends taken out of the company by directors.
• Shareholder salaries — When shareholders also work for the business as an employee, they may be entitled to a salary. Some shareholders may choose not to take a salary as well as dividends, whereas others may disagree.
• Equal contributions and input — One or more shareholders may become disgruntled at what they perceive to be a comparable lack of input and contribution by another shareholder.
• Conflicts of interest — If one shareholder is involved in another competing or related business, this may be considered a conflict of interests and tensions may rise as a result.
• Buying out or dismissing a shareholder — The cost of buying out a shareholder can be high, and disagreements can easily occur over this.
Even the most seemingly insignificant of disputes can easily blow up, particularly if one or more shareholders feel they are being overruled or ignored in their concerns.
If the shareholders are split over a certain issue, this can cause deadlock and stall the progress of decisions or responsibilities which need to be carried out by the shareholders.
Any reduction in business activity whilst disputes are being resolved can cause real financial problems for a business, resulting in lowered profits and even more disgruntled shareholders.
The potential for damage caused by these sort of disagreements to the company, its business operations and profits is huge — and that’s why any shareholder dispute should be taken very seriously indeed, and specialist legal advice taken at the earliest possible stage.
What causes minority shareholder disputes?
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.
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
How do I avoid a shareholder dispute?
Although a dispute will almost always occur at some point during a company’s operation, the likelihood of it occurring — and the potential damage it can cause — can be limited by effecting proper forward planning.
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.
To limit the risk of these kind of damaging conflicts, it’s very important that a properly drafted shareholders’ agreement is put in place on day one, and that it covers a number of potential pitfalls, such as:
• Salaries, dividends and fees paid to directors
• Shareholders’ responsibilities
• The objectives of the company
• How the company is to be financed
• How shareholders can be bought out
• What the process and logistics of major decisions will be
Click here to find out more about Shareholder Agreements – and what a well drafted agreement should contain
Shareholders agreements – the need for specialist legal advice
Drawing up a shareholders’ agreement isn’t as straightforward as it sounds, and you’ll want to make sure it’s been done by an experienced and specialist business law solicitor who will be able to make sure you’ve covered all the necessary areas and that the agreement will stand up to scrutiny. After all, an experienced business solicitor will know what problems usually crop up and will be able to help you mitigate against them.
The potential for disharmony and disputes among shareholders is high, and the damage that can be caused by a dispute could be very damaging to the business, especially when shareholdings and profits are at stake.
Dispute resolution is vital to being able to move forwards and ensure the future success of the business. Resolving these kind of commercial disputes can be delicate and complicated, especially if rules and regulations have not been complied with. There are likely to be many issues and potential solutions which haven’t yet been considered, and a qualified, experienced business solicitor will be able to advise you as to these. After all, it’s commercially sensible to ensure that the dispute is resolved as quickly and effectively as possible.
Small Claims for shareholder disputes under £10,000
Small claims are for straight forward cases, compensation or money back, which do not involve large amounts of money (usually under £10,000).
Unfortunately, it’s usually not going to be cost effective for you to instruct Solicitors when making this type of legal claim because legal costs are not awarded – even if you are successful in the Small Claims Court. In other words, even if you win your case you can’t recover your legal costs from the other side.
As a result, most solicitors are usually unable to help people with small claims – because it is simply not cost-effective for the client.
The importance of dealing with disagreements at an early stage
All shareholders and anyone else involved in the business would undoubtedly agree that the best thing for the business would be for it to be able to move forward without disputes and disagreements, and to continue building and developing. For that reason, if a dispute does arise, it is important that it’s resolved quickly and effectively.
Worried about a Company Disagreement? Call our Shareholder Disputes Solicitors for FREE initial phone advice
Should a shareholder dispute arise in your business, it is important to get the right legal advice to clarify the situation, its ramifications and possible ways in which it could be resolved.
The short-term costs of speaking to a business solicitor are likely to be minimal compared to the potential damage that could be caused to your business and the livelihoods which depend on its success.
And what’s more, our specialist commercial law solicitors always offer FREE initial phone advice
Call one of our team now for free initial phone advice on your shareholder dispute – locally on [01722] 422 300 or on FREEPHONE 0800 1404544
