Directors’ and Shareholders’ Disputes

A company is a separate legal entity, distinct from its directors and shareholders. This means that a company may sue, or be sued by, its directors and/or shareholders. In many cases the company is the only possible claimant in relation to wrongdoing that has occurred.

The key document which sets out the balance of power within a company is the Articles of Association of the company. These specify the respective powers of directors and shareholders in the company.

Directors generally have the day to day control of the company under the Articles, making decisions for the company including whether or not to enter into any contract, to raise finance or to take any other steps in relation to the management of the company.

However, shareholders hold the ultimate power and, by majority vote, can dismiss a director and appoint a new director to the board.

Shareholders’ disputes cover a broad area of company law and business law. Often the shareholders are also directors and this brings in a number of legal aspects relating to directors’ duties.

Most shareholders’ disputes arise over decision-making issues between majority and minority shareholders. Minority shareholders often feel excluded by majority shareholders but the law protects them and enables them to make claims for being ‘unfairly prejudiced’ by the majority shareholders. Other disputes arise when there is a breach of a shareholder agreement by certain shareholders and the others seek to redress the wrong committed for the sake of the company.

Our team offers comprehensive advice in all matters of boardroom and shareholders’ disputes, from negotiations to court proceedings.