Shareholder Disputes - FAQs

This FAQ aims to address common questions a shareholder might have when facing a dispute with another shareholder.

Q: What are the common causes of shareholder disputes?

Shareholder disputes are unfortunately quite common and can arise from a variety of issues. Often, disputes involve disagreements about the direction of the company, how finances are managed, or concerns about the actions of directors.

Examples of common shareholder disputes:

• Unfair treatment: A shareholder feels they are being treated unfairly compared to others.
• Disagreement with decisions: A shareholder disagrees with decisions being made by the company directors.
• Director misconduct: There are concerns about directors acting improperly, exceeding their powers, or not acting in the best interests of the company.
• Lack of transparency: Shareholders are not kept informed about important company matters or are excluded from meetings.
• Conflict of interest: A director acts in a way that benefits them personally rather than the company.
• Majority vs. Minority Shareholders: Disputes arise due to differing rights and powers between majority and minority shareholders.

Q: What are my rights as a shareholder?

Your rights as a shareholder depend on a number of factors, including the company's Articles of Association, any shareholder agreements in place, the type of shares you own, and the percentage of shares you hold.

Basic Shareholder Rights:

• Receive Notice of and Vote at General Meetings: You have the right to be informed about and participate in company meetings.
• Request a General Meeting: You can ask the court to call a meeting if necessary.
• Inspect Certain Company Documents: You have the right to access specific documents, including registers of members and directors, certain contracts, minutes of meetings, and more.

Rights Dependent on Shareholding:

• Blocking Resolutions: If you own or control more than 25% of shares, you can block special resolutions. If you own or control over 50%, you can block ordinary resolutions.

Q: What is a shareholders' agreement and how can it help?

A shareholders' agreement is a private, legally binding contract between the shareholders of a company. It outlines the rights and obligations of each shareholder and can be crucial in preventing and resolving disputes.

Benefits of a Shareholders' Agreement:

• Clarity and Detail: It can provide more specific details about shareholder rights and responsibilities than the Articles of Association.
• Dispute Resolution Procedures: It can set out clear procedures for handling disagreements between shareholders.
• Protection for Minority Shareholders: It can include provisions to safeguard the interests of minority shareholders.

Q: What can I do if I believe I am being treated unfairly?

There are several legal options available if you believe your rights as a shareholder are being infringed or that the company's affairs are being conducted unfairly.

Legal Options for Shareholder Disputes:

• Unfair Prejudice Petition: If the company's affairs are being managed in a way that is unfairly prejudicial to your interests as a shareholder, you can petition the court for relief. This often results in a court order for the purchase of your shares.
• Winding Up Petition: In serious cases, such as deadlock or serious mismanagement, you can petition the court to wind up the company. This is a last resort, as it leads to the dissolution of the company and distribution of assets.
• Derivative Action: If a director has breached their duties to the company, you can bring a claim on behalf of the company. Note that any remedies awarded will go to the company, not directly to you.

Q: How can I get help resolving a shareholder dispute?

It's crucial to seek legal advice from an experienced solicitor as early as possible in a shareholder dispute. RGF's litigation solicitors can help you understand your rights, explore your options, and work towards a resolution.

Ways RGF Can Help:

• Negotiation and Mediation: RGF can assist in negotiating with the other shareholder(s) or facilitating mediation to reach a settlement.
• Litigation: If necessary, RGF can represent you in court proceedings to enforce your rights.
• Advice and Guidance: RGF can provide ongoing advice and support throughout the dispute resolution process.

It's important to remember that shareholder disputes can be complex and stressful. Seeking professional legal advice will help you navigate the process effectively and protect your interests.

This article is intended to provide a general overview and is not intended to be exhaustive or to provide legal advice. You should consult with a qualified legal professional for advice on your specific circumstances.

No party should rely on this guide as a substitute for obtaining legal advice from a qualified professional.