Shareholder Dispute Solicitors

What you can recover depends on the nature of your claim. Breach of agreement disputes are often resolved through money (damages). More complex partnership and/or shareholder disputes can lead to dissolution and other orders such as sale of assets and need to obtain declarations. Other orders can include share sale and/or purchase orders, or orders requiring a party to comply with their obligations. Where the claim is a formal unfair prejudice petition under Section 994, the remedies can be incredibly broad and in accordance with Section 996 of the Companies Act 2006 the court has a very wide discretion on what it can do to cure the harm that’s been suffered. The most common order is a share purchase order, requiring one party to buy the other’s shares, there are variations and is further complexity- for example regarding the valuation date or basis of those shares and what should happen in the meantime.

A judge can also make orders regulating the company’s future affairs, order the company wound up on just and equitable grounds under Section 122(1)(g) of the Insolvency Act 1986, or allow a derivative claim brought by the company itself under Sections 260 to 264 of the Companies Act 2006.

Most unfair prejudice petitions are resolved through negotiated settlement rather than a full trial, but that settlement rarely comes from simply proposing mediation. It tends to follow once an opponent understands there are real consequences to continuing, and that they’ll be held to account for their conduct unless they settle. Mediation can then provide a useful, structured framework for reaching agreement — but only once they understand the need for, and benefit of, compromise, including what will happen if there is no agreement. Often we find pursuit of court proceedings will ultimately move a wayward Director, Shareholder or Partner to a more commercially sensible position. Where a dispute also involves recovering money owed to the company, our debt recovery team can advise on that alongside the wider shareholder claim.

Not sure what a realistic outcome looks like in your case? Get in touch for an honest, no-cost assessment of your prospects before you commit to a course of action. Our commercial litigation team act in these disputes nationally and will be happy to assist you.

Cost is often the first question in any dispute, particularly where the business is under pressure. Typically these disputes are initially funded on a private fee paying basis in terms of at least the initial review and advice and initial preparatory steps and work. Where a matter qualifies, we may be able to offer funding through a Conditional Fee Agreement (CFA), commonly known as No Win No Fee, or a Damages-Based Agreement (DBA), where our fee is a percentage of what’s recovered. These are different models: a CFA links our fee to a successful outcome, while a DBA ties it to the sum recovered.

We only enter into CFA or DBA agreements for some commercial disputes, subject to case assessment and our funding criteria, typically on qualifying disputes valued over £10,000 with strong prospects of success. It’s never available for personal injury, family law, housing disrepair or harassment claims. We may charge for an initial review where there is complexity – legally, factually and/or procedurally – and we will always be transparent about that.

Want to know whether your dispute could qualify for No Win No Fee funding? Contact us and we’ll assess your case.

The simplest example comes from a Director, Partner or Shareholder not holding up their end of an agreement, or pressuring another party to take advantage. Some issues are clear-cut, such as removal of company assets such as money or property without consent, and we frequently litigate those situations.

Other disputes can be less straightforward, such as where one party is acting in a way to exert greater control, diverting company opportunities or depriving you of information. One shareholder may want to exit while the other disagrees, which can lead to frustration and, ultimately, unlawful steps being taken that require swift remedial action. More significant disputes can involve disputed changes to articles of association and the issuance of new shares or changes to voting rights or directorships, or can include the unlawful removal of assets such as money and property from a company or Special Purpose Vehicle (SPV).

The following are all examples of conduct that might amount to unfair prejudice:

• A Shareholder acting in breach of the articles of association;
• Excluding a Shareholder from the business, management or information of the company;
• Deliberate devaluation of shares;
• Diverting opportunities to another entity or person;
• Excessive awards of Director pay; and
• Mismanagement of company monies and/or assets.

To succeed, Shareholders must show that the conduct complained of was both unfair and prejudicial to their interests. Shareholders in the UK enjoy automatic statutory rights and protections under the Companies Act 2006, alongside the company’s articles of association and any Shareholders’ agreement, and conduct that is unfairly prejudicial can be challenged under S.994, S.995 and S.996 of the Act. Section 994 gives minority Shareholders access to remedies where their shareholding is deliberately devalued or where they’re removed from management, even where they had a reasonable expectation of involvement and even where there’s no formal agreement between Shareholders in place.

Section 994 claims are known as petitions to the court. These are specialist proceedings, which we pursue in the High Court on your behalf, allowing a Shareholder to complain that the company’s affairs are being conducted, or have been conducted, in a manner that is unfairly prejudicial to the interests of members generally or of some part of its members.

The court has broad discretion and powers when considering these claims. The Shareholders or Directors who have acted unfairly and prejudicially are named as Defendants or Respondents personally, since limited liability protection falls away where their conduct was for personal benefit. The company itself is normally also named, largely so it is bound by, and cannot claim to be unaware of, proceedings that clearly relate to it.

Directors owe statutory duties under the Companies Act 2006, including duties to act within their powers, promote the success of the company, and avoid conflicts of interest. Breaching these, whether by diverting business opportunities, misusing confidential information, or mismanaging funds, can give rise to a claim against the Director personally, as well as feeding into a wider unfair prejudice petition.

Deadlock disputes typically arise where two Shareholders each hold 50% and can no longer agree on the direction of the business. Without a mechanism in the Shareholders’ agreement or articles to break the deadlock, decision-making can grind to a halt, and litigation, including a petition to wind up the company on just and equitable grounds, may become the only realistic route forward.

A common trigger is one Shareholder being frozen out, removed from the board, denied access to accounts, or cut out of decision-making. This is one of the clearest examples of conduct capable of amounting to unfair prejudice, particularly where the excluded Shareholder had a reasonable expectation of ongoing involvement.

Many businesses are founded on partnerships when two people agree to go into business together. There are three types of legal partnership in England and Wales:

1. Ordinary/general partnerships
2. Limited partnerships
3. Limited liability partnerships (LLPs)

An ordinary partnership is the simplest form, involving at least two Partners running a business together on broadly equal terms. Limited partnerships combine limited and ordinary Partners, with different Partners taking on different roles and levels of liability for partnership debts. LLPs are taxed as partnerships but function more like a corporate entity.

A partnership agreement should set out key responsibilities and how disputes are handled if they arise. Without one, a business falls under the Partnership Act 1890, which broadly provides that ordinary Partners share in profits and liability equally, and that ending the relationship requires dissolving the business entirely, an outcome that can be costly and time-consuming. Ordinary Partners also then have an equal claim to profits, even if they contribute less.

Partnership disputes tend to arise when limited partners feel they deserve more input into decisions, when a Partner commits wrongdoing or acts against agreed policies, or when a Partner wants to withdraw. Partners and Members in partnerships and LLPs have broadly similar protections to Shareholders, and can have rights to remedies under both the Partnership Act 1890 and, in appropriate cases, the Companies Act 2006.

Both Partners and Shareholders hold partial ownership of a company. Partners usually divide ownership between themselves and are directly involved in day-to-day operations.

Shareholders, by contrast, purchase partial ownership through shares, and typically hold voting rights without necessarily carrying management responsibilities. Both can be governed by Partnership or Shareholders’ agreements setting out what each party contributes and receives in return, and there’s often overlap between the roles of Director and Shareholder, which a company’s articles of association should help delineate.

Not sure whether you’re dealing with a partnership dispute, a shareholder dispute, or both? The sooner we understand the detail, the sooner we can tell you exactly where you stand. Contact our commercial litigation team at Helix Law to discuss your dispute with a litigation solicitor. We have acted in shareholder and partnership disputes for other solicitors (i.e. in disputes concerning their businesses) and in litigation involving companies with assets and shareholder value of tens of millions (just under £100m). More often we act for companies where disputes arise over hundreds of thousands to millions of pounds in dispute. Our team acts nationally and whatever your situation we would love to help you.

We start by assessing the strength of your position and the value at stake, then look to resolve the dispute through negotiation, a letter before action, or mediation wherever possible. Where the other side won’t engage, we’ll pursue court proceedings, including unfair prejudice petitions, on your behalf.

Shareholder oppression, more commonly called unfair prejudice in England and Wales, covers conduct that unfairly harms a Shareholder’s interests — exclusion from management, deliberate devaluation of shares, excessive Director pay, or mismanagement of company assets — and can support a claim under Section 994 of the Companies Act 2006.

A Shareholder can bring a claim against another Shareholder where their conduct is unfairly prejudicial to the interests of the company’s members, breaches the articles of association or a Shareholders’ agreement, or involves the misuse of company assets. The right route depends on the conduct and the governing documents in place.

A 20% Shareholder holds statutory rights under the Companies Act 2006, including voting rights proportionate to their shareholding and protection from unfair prejudice. A 20% stake alone doesn’t give you control, but it can be enough to bring an unfair prejudice petition if your interests have been unfairly harmed.

As a 50% Shareholder, you hold equal voting power with any other 50% Shareholder, meaning neither party can pass certain resolutions without the other’s agreement. This equal split is precisely what tends to cause deadlock, and your remedies will often depend on what your Shareholders’ agreement says, if one exists.

Unfair prejudice is conduct in a company’s affairs that unfairly harms the interests of one or more of its Shareholders. It most commonly arises where one Shareholder suffers prejudice, directly or indirectly, from another Shareholder’s or Director’s actions, and is set out in Section 994 of the Companies Act 2006.

A minority Shareholder retains statutory protections under the Companies Act 2006 regardless of their percentage holding, including the right not to be unfairly prejudiced by the conduct of majority Shareholders or Directors. These protections apply even where there’s no formal Shareholders’ agreement in place.

A Shareholder generally cannot be forced to sell their shares unless they’ve agreed to a process resulting in that outcome, typically set out in a Shareholders’ agreement, or a court orders the sale. Where no agreement exists, the court still has wide discretion under Section 996 of the Companies Act 2006 to order a share purchase.

Yes. Holding exactly 50% of the shares doesn’t prevent a Shareholder from bringing an unfair prejudice petition, provided they can show the company’s affairs have been conducted in a manner unfairly prejudicial to their interests. Deadlock between equal Shareholders is itself a common trigger for this type of claim.

Without a Shareholders’ agreement, disputes fall back on the Companies Act 2006 and the company’s articles of association, a narrower safety net than a bespoke agreement provides. The court retains wide discretion to resolve the dispute, including ordering a share purchase, but the absence of an agreement often makes outcomes less predictable.

Finding out a fellow Director, Shareholder or Partner has broken your trust is unsettling, especially when your business feels like it’s on the line. Shareholder and partnership disputes tend to get harder, not easier, the longer they’re left unaddressed, and it’s easy to feel unsure what to do first. 

Our commercial litigation team give clear, honest assessments of options at the outset, and act decisively, including through the courts where that’s what it takes, to protect your position. Contact Helix Law today for a no-cost, no-obligation initial conversation.