Do you need legal advice to resolve a dispute with a shareholder? Have you exhausted all other avenues to reach a resolution? We can help.
When a business starts up, the shareholder owners of the business are likely to have the same goals and plans for the future. As the business grows, circumstances can change and the objectives of the shareholders may start to diverge. Differences of opinion can then turn into legal disputes which make it difficult to run the business effectively. If this happens to your business then we are here to help resolve the dispute so you can focus on the important job of running the business.
Have you got a shareholders’ agreement in place?
A shareholders’ agreement is a legal document entered into by all the shareholders in a company. It regulates the relationship between them, states how some decision-making must be conducted, demonstrates the ownership of the shares and gives protection to the shareholders.
Examples of things that can be covered in a shareholders’ agreement include:
- Rules on how important business decisions should be made
- Rules for resolving disputes
- Types of share and dividend policy
- Procedures for valuing and selling shares if a shareholder wishes to sell some or all of their shares
- Rules for removing a shareholder
- Restrictive covenants on shareholders preventing them from competing with the business
What happens if you don’t have a shareholders’ agreement?
Unfortunately many business don’t put a shareholders’ agreement in place when they start up to save costs and as they grow this continues to be overlooked.
Without a shareholders’ agreement in place, both the company and the individual shareholders could be exposed to unresolvable conflict in the future. The company has to fall back on the standard terms in their Articles of Association which are very unlikely to say anything about how to resolve a deadlock. A shareholders’ agreement will clarify the legal standpoint of each party if there is a dispute or a deadlock situation occurs.
How to deal with a shareholder dispute
Disputes between shareholders can be very damaging to a business, particularly when the shareholders are directly involved in the day to day running.
If a dispute arises it is best to try and resolve it quickly and informally, but if that is not possible then legal action may be necessary. We suggest taking the following approach.
- Review the shareholders’ agreement – review the existing agreement (if there is one) to establish your legal standpoint and see if there is a solution already laid out
- Discuss internally – it is helpful to hold an informal meeting to understand the full scope of the dispute with the aim of coming to a resolution
- Mediation & ADR – if informal discussions have been unsuccessful, mediation or alternative dispute resolution can be a more cost-effective way to reach an agreement than bringing court proceedings
- Exit or Buyout options – consider whether a buyout or share transfer is an option to allow for a clean-cut solution?
- Legal Action – if all of the above steps have failed, it’s likely that legal action is the only option and that is where Backhouse Solicitors can help
Contact the experts at Backhouse Solicitors
If you are facing a shareholder dispute in your business then our Litigation and Dispute Resolution team are here to fight your corner. We will sit with you to establish the details of the situation, explain your options and if necessary fight your corner in court. To find out more, contact the team at Backhouse Solicitors today to book a free initial consultation at our Chelmsford or Leigh-on-Sea offices.
Tel: 01245 893400 | 01702 410880
Email: info@backhouse-solicitors.co.uk
Visit our Chelmsford office: 17 Duke Street, Chelmsford, Essex, CM1 1JU
Visit our Leigh-on-Sea office: 22-24 Elm Road, Leigh-on-Sea, Essex, SS9 1SN
Or send us a message through the Contact Us page on this website