I have fallen out with my fellow shareholders. What do I do?
A lot of businesses are struggling with the current situation, tackling new and unexpected challenges as the business world finds its “new norm”.
What we should not forget, however, is that alongside the new challenges, a lot of businesses were already experiencing issues and many shareholders and directors were dissatisfied with the manner in which their companies were being run and with the decisions being made, supposedly in their interests.
Just because the world is undergoing changes, does not alter the fact that concerns and disputes that have existed for a while still need to be tackled.
In response to comments made from some of our clients, this article is one in a series of articles to highlight specific areas of law and their application to ongoing contracts and business relationships.
Indeed, with revised enforced working arrangement come new stresses which could well impact on the harmony between shareholders and directors at a key moment in the business and its development. Family businesses are perhaps even more likely to feel the strain as directors and shareholders suddenly find themselves working in closer proximity and with their decisions under even closer scrutiny.
Specialist legal advice
At Gregg Latchams we remain focussed on helping to sort those issues and disputes out.
We provide specialist expertise in shareholder protection and the protection of minority shareholders from the unfairly prejudicial conduct of the affairs of the companies in which they are interested.
Sections 994 to 996 in Part 30 of the Companies Act 2006 enables a shareholder in a company who is being treated in an ‘unfairly prejudicial’ way to seek relief from the court. Typically, these cases involve companies with relatively small numbers of shareholders. Those shareholders are usually also directors and may be the only directors of the company.
The shareholders/directors will generally have fallen out with each other. The unfairly prejudicial conduct often takes the form of an exclusion of one shareholder/director by another from the affairs of the company.
On other occasions, it arises because of the misappropriation by one shareholder / director of property or funds belonging to the company or of a business opportunity that might have been enjoyed by the company.
In other cases, it might take the form of wrongful dealings with shares, improper dividends, salary or other payments or other improper conduct of the company’s affairs.
The legislation gives the court very wide powers to control the conduct of the affairs of the company and its shareholders / directors. Such proceedings regularly result in the court ordering that one shareholder / director should purchase the shares of another at a value determined by the court to be fair in all the circumstances.
There is also the potential to bring an action in the name of the company against one of its directors if it is considered that the director has acted outside of their powers, providing further options to an aggrieved director/shareholder.
We work together with Counsel specialising in this area. One of those barristers is Andrew Marsden of Commercial Chambers, Bristol. He has published a useful guide to the law and practice in this area and you can access or download a copy here.