For a business to grow and prosper, it is vital that the people at the helm get on and have a shared vision about key issues of strategic importance. Where a business is run through a private limited company, it is also essential that shareholders have a good relationship and that the rights of both the majority and minority members are respected.
Where a disagreement arises between shareholders, for example about the direction a company is taking or the way in which it is being managed, then a dispute can develop which could easily get out of hand if not tackled quickly.
Whether you are a majority shareholder whose strategic plans for a company are being blocked, or a minority shareholder whose views on the future direction that a company should take are being unjustifiably ignored, the basis on which your dispute might be capable of being resolved will depend on a number of factors.
These tend to include such matters as:
The vast majority of shareholder disputes can be resolved by simply reminding the other members (in firm and unequivocal terms) of their obligations towards you in the company’s articles of association and any shareholder agreement that exists.
That said, there are cases where this is not enough and where it instead becomes necessary to point out any other legal avenues that may be open to you to ensure you are treated fairly and in accordance with any contractual or statutory rights that you have.
For example, depending on the nature and extent of your shareholding and what it is that has happened to give rise to the dispute, it may be possible for you to:
However, as confirmed by the High Court in the recent case of Duneau v Klimt Invest SA & Others (2022), a winding-up order is only likely to be made where you can show that there is no other appropriate right of redress open to you and that, where there is, your decision not to pursue this can be said to be reasonable in the circumstances.
One scenario in which a winding-up order on just and equitable grounds might be justified is where there has been a breakdown in trust and confidence between you and the other members of a company which can lawfully be categorised as a quasi-partnership.
While this will be a question of fact, depending on the circumstances in which your company was established and the discussions that took place at the time you joined or the company was formed, there is a good chance that you will fall into this category where:
By taking legal advice at an early stage, you can find out quickly what your rights as a shareholder are and the options open to you to address your concerns. This means that you can then commence discussions with the other company members from a position of strength, knowing what a good deal looks like from your perspective.
It is important to say that legal proceedings are not inevitable.
If you come to us for help at an early stage, there is a good chance that we can support you to resolve things amicably through a negotiated settlement, or we can encourage your opponent to attend a mediation with you to explore terms for a fair compromise.
This article is for general information only and does not constitute legal or professional advice. Please note that the law may have changed since this article was published.
Published on 19 December 2022