A shareholder is using company assets for personal gain. What can I do to stop this?
Using company assets for personal gain breaches directors’ statutory duties and will almost certainly amount to unfairly prejudicial conduct. Remedies can be sought from the court, including on an urgent basis, via an unfair prejudice petition. If necessary and appropriate, we often immediately pursue an injunction application to prevent further conduct and preserve the company and shareholder value. Directors must avoid conflicts of interest and have obligations to promote the company’s success before their own interests.
Breaches are not always deliberate and can sometimes occur through an innocent mistake, particularly in small companies where directors are shareholders, and the roles are blurred. Equally, there can often be a false sense that one shareholder, usually the majority shareholder, can do as they please. That is not the case, and there are very considerable (and robust) protections for even minority shareholders.
Serious breaches of duty — usually determined by intent and any value attached — typically warrant professional advice and can result in legal action, particularly if the business has suffered harm as a result.
A breach of shareholder duty is a complex legal matter requiring specialist expert advice, often urgently.
Court proceedings can be used to recover company property and money, to set aside improper transactions or arrangements, and to recoup any personal profit a director has made. The court can also remove a director from office.
The remedies available to shareholders who have suffered unfair prejudice are incredibly broad in accordance with s.994-996 Companies Act 2006.
The commercial position requires constant, careful legal and commercial analysis.
Aside from pursuing an unfair prejudice petition against other shareholders, if the company itself suffers a loss, shareholders can seek permission from the court to pursue a derivative claim which, in simple terms, are court proceedings issued on the company’s behalf.