Shareholder Dispute Lawyers

A minority shareholder has the rights given by the articles, any shareholders agreement and the Companies Act 2006, including the right to receive accounts, to vote their shares and to be treated fairly. The most important protection is the unfair prejudice petition under section 994, which allows a member to seek relief where the company's affairs are conducted in a manner unfairly prejudicial to their interests. The court's most common remedy is an order that the majority purchase the minority's shares at a fair value.

A shareholders agreement is a contract, and breach of it gives rise to a claim for damages or, where damages are inadequate, injunctive relief or specific performance. The same conduct will often also support an unfair prejudice petition, because the agreements between shareholders are central to what fairness requires. The standard limitation period for a contract claim is six years from the breach (under the Limitation Act 1980).

There is no general right to be bought out. A sale is achieved through the articles or shareholders agreement where they provide for it, through negotiation, or through a court order, most commonly on an unfair prejudice petition where a buyout at fair value is the usual remedy. The prospect of that order is what brings most majorities to the table, which is why petitions settle far more often than they are tried.

Valuation is usually carried out by independent experts by reference to the company’s accounts, earnings, assets and prospects. The central battlegrounds are the valuation date and whether a minority discount applies. In companies run as quasi partnerships the ordinary rule is that shares are valued pro rata without a minority discount. We work with forensic accountants so the figure advanced on your behalf is supported by evidence.

A claim brought by a shareholder in the name of the company against a director or third party for a wrong done to the company itself, such as misappropriation of company assets. Derivative claims (under Part 11 of the Companies Act 2006) require the court’s permission to continue and are comparatively rare, because where the real complaint is about how the shareholder personally has been treated, an unfair prejudice petition is normally the better route.

A contributory may petition to wind the company up on just and equitable grounds (under section 122(1)(g) of the Insolvency Act 1986), and deadlock in a two person company is a recognised basis. It is a remedy of last resort: the court will not wind up a solvent company where a reasonable alternative, such as a fair buyout offer, is available. The petition’s real power is usually the pressure it applies towards that buyout.

A negotiated buyout can be agreed in weeks. Mediation is usually arranged within a couple of months and most conclude in a single day. A contested unfair prejudice petition takes a year or more to reach trial, which is one of several reasons we treat litigation as the last resort rather than the first move.