Shareholder Disputes

In many cases, shareholder disputes come down to a difference of interpretation between the various parties over the contents of the company’s articles of association or a shareholder agreement. Any ambiguity in the way these vital documents are written can lead to potential conflict, so the simplest and most effective way to avoid potential shareholder disputes is to have a very clearly written, unambiguous articles of association and shareholder agreements.

By accounting for all of the possible scenarios where shareholders will need to take a decision and setting out how those decisions should be made, good articles of association and shareholder agreements will make disputes much less likely, saving you time, money and unnecessary conflict.

Our solicitors are experts in helping the parties investing in a business to negotiate articles of association and shareholder agreements that reflect their individual concerns and the needs of the business. We can help you to get the right agreement in place that foresees any potential problems and provides a clear framework for dealing with those issues. This can help to ensure you are able to act efficiently and effectively as shareholders while keeping conflict to a minimum.

We realise how sensitive shareholder disputes can be, with the need to balance finding a solution that works for you and the business against preserving a positive relationship between shareholders where you need to continue working together.

To that end, we will listen to your concerns and approach the dispute in a way that reflects your priorities. In most cases, this means seeking to find an amicable resolution through negotiation and/or Alternative Dispute Resolution ("ADR"), with court proceedings generally being a last resort.

We have strong skills in a number of different ADR methods, so can offer different options to match your circumstances. However, we also have strong experience with taking court action to resolve shareholder disputes where required, so whatever approach is needed, we can provide the necessary expertise.

Arbitration can be a very efficient and effective way to resolve shareholder disputes. For this reason, it is common for shareholders’ agreements to contain an ‘arbitration clause’ specifying that any dispute must be dealt with through arbitration.

The process involves one of our arbitrators acting as an independent third-party who will investigate the circumstances surrounding the dispute, then provide a decision on how they believe the dispute should be resolved.

All of the shareholders involved in the dispute will need to agree to use arbitration and sign an arbitration agreement committing you to accept the arbitrator’s decision. Where your shareholders’ agreement contains an arbitration clause, a separate arbitration agreement may not be required.

Arbitration is often favoured for shareholder disputes because it can allow you to get an answer faster than relying on other dispute resolution options or court proceedings, while also offering a definitive solution for even the most challenging legal conflicts.

Mediation focuses on getting the shareholders involved in the dispute to agree a solution together under the guidance of a trained, independent commercial mediator.

The process involves the shareholders coming together to talk through the points of contention and work towards agreeing a way forward that everyone can accept and that protects the business.

The mediator acts as a neutral third-party to help facilitate discussions between shareholders and to sidestep any potential conflict, helping to keep the process productive and non-confrontational.

The advantages of mediation include allowing the shareholders to keep control over the process of resolving the dispute and helping to defuse tensions between shareholders by encouraging them to air their grievances in a positive way and work through them together.

Mediation may involve a number of sessions, depending on how complicated the dispute is and how quickly you can agree a solution. However, it is almost always significantly faster and less costly than court proceedings.

You will be able to have any agreement you make through mediation reviewed by your own independent solicitors before making the agreement legally binding and anything you disclose during mediation cannot be used in any subsequent court proceedings, protecting you from the risk of weakening your position with any concessions you might make.

In some cases, court proceedings may be the only option to resolve a shareholder dispute. If you wish to pursue court action, our Litigation & Dispute Resolution team can provide the experienced support and skilled representation you need at every stage of proceedings.

We can advise you on whether court proceedings are likely to result in a positive outcome for you and your business, as well as making sure you understand all of the implications of pursuing this action. We can also explore all opportunities for an out-of-court settlement, helping to ensure we serve your best interests at all times