shareholder disputes

Disputes can arise at a shareholder level for a number of reasons but the effective resolution of such disputes always requires an extensive knowledge of corporate law and in particular the law relating to company meetings and procedure.  Board meetings and general meetings often have to be convened, resolutions proposed and tactics deployed to take advantage of the law around voting (eg the use of proxies), alternate directors, class rights and so forth.  This is where our specialist knowledge of company law becomes so valuable to our clients. 

Such disputes arise in a variety of situations, including:

• • Conflict of interest and related party transactions;
• • Non-payment of dividends;
• • The provision of information to shareholders;
• • Exclusion from meetings
• • Non-compliance with Investment Agreements, Shareholders agreements and Collaboration Agreements;
• • Directors’ misfeasance and breach of duty.

At White & Black, we are able to advise on so-called “unfair prejudice” actions.  These are claims that a company’s affairs have been managed in a way that is unfairly prejudicial to shareholders.  In such situations, the Court has extensive powers (under s. 994 Companies Act 2006) to make various orders including an order for the mandatory purchase of a shareholder’s shares.  These actions are often highly complex and time consuming and we always look to explore negotiated alternatives with our clients. We also advise our clients on the potential to seek an order under the Insolvency Act 1986 to have a company wound-up on the ground that this is “just and equitable”.

We also advise partners of LLP, LPs (under the 1907 Act) and unregistered partnerships on their rights in relation to disputes with co-partners.

Derivative claims

We also advise on the use of derivative claims under the Companies Act 2006.  Such claims can be brought against a company director of the company or a third party for claims of negligence, default breach of duty and breach of trust. The relevant parts of the Companies Act, 2006 came into force on 1 October 2007 and adopts the recommendation of the Law Commission that there should be a "new derivative procedure with more modern, flexible and accessible criteria for determining whether a shareholder can pursue an action." The Companies Act 2006 Act sets out a wide range of circumstances in which a derivative action may be brought by a shareholder (certainly broader than under the previous common law).  In particular, a claim may now be brought even if a director has not benefited personally from his / her breach of duty and it is not necessary to show that a director(s) control(s) a majority of the company's shares.  The process involves 2 stages:

• stage 1 - the shareholder must demonstrate, by evidence, a ‘prima facie’ case to the Court in order to bring a derivative claim (which is considered by the Court without evidence from the defendant); and
• stage 2 - The court may require evidence to be provided by the company (prior to the start of the substantive action).

 The Companies Act 2006 has also placed directors’ duties on a new statutory footing.  These include duties to promote the success of the company, to avoid conflicts of interest and not to accept benefits from third parties. A material breach of these duties is actionable by shareholders.