Meta Description: Suspect a shareholder or director of using company assets for personal gain? It’s quite common and a breach of statutory duties. Learn more about it here.

A Shareholder Is Using Company Assets For Personal Gain. What Can I Do to Stop This?

Finding out that another shareholder or director is using company assets for personal gain or profit is not as unusual as you might think. Fortunately, the law defines statutory duties and conflicts of interest in this situation, so there are considerable available options for redress if there’s been harm or financial loss. This quick read gives a summary of the law, describing what a breach of duty looks like, how to build your case, and possible remedies. Our commercial litigation team act in these disputes nationally and will be happy to assist you if you have any queries or require assistance. 

Identify Breaches of Duty and Conflicts Over Company Assets

Under English law, company directors owe statutory duties to the company. Using company property, information, or opportunities for personal gain can breach these duties—particularly the duty to avoid conflicts of interest under Companies Act 2006 Section 175 This almost certainly also amounts to unfairly prejudicial conduct in breach of sections 994-996 Companies Act 2006. Conflicts of interest are defined as the exploitation of information, opportunity, and property, such as company assets. 

Conflicted situations in companies can be complex and not always obvious. There are a range of possible remedies for a shareholder who has suffered harm in a conflict situation where company assets have been used for personal gain.

Understand the Legal Duties of Directors and Shareholders

It’s easy for the lines to become blurred between corporate behaviour and personal gain, especially in small companies where directors are also shareholders. Sometimes a breach of duty can occur by innocent mistake, on other occasions this can be calculated.

Directors must avoid conflict and always prioritise the company’s success over their own gain. Failure to do so is a breach of statutory duty.

Gather Evidence to Support Your Claim

Generally speaking the burden is on the Claimant to prove allegations on the balance of probability, meaning over 50%. This includes in Director and Shareholder litigation. Bringing a formal claim for misuse of company assets is a serious allegation that can give rise to severe consequences, including legal action to recover company assets and money and even removal of that director from office.

The strength of your case will turn on your evidence. Focus on contemporaneous, verifiable material:

• Financial records (bank statements, ledgers, expense claims, invoices);
• Company communications (emails, board minutes, messaging apps);
• Corporate documents (service agreements, shareholder agreements, policies); and/or
• Witness accounts and any audit or accounting analysis.

If litigation is likely you don’t need to actually go off and obtain the above immediately before instructing specialist solicitors, but should consider whether generally speaking the above are likely to be available in support of a claim if needed. Where we’re instructed we immediately discuss and assess this with you at the outset.

Assess Whether Conduct Constitutes Unfair Prejudice or a Breach of Duty

Unfair prejudice, defined bysection 994 of the Companies Act 2006, protects shareholders where the company’s affairs are conducted in a manner by another shareholder that is unfairly prejudicial to their interests. Using company assets for private benefit can qualify—but two factors matter:

• Intent and pattern: was it an isolated mistake or part of a deliberate course of conduct?
• Impact and harm: has the conduct caused real financial loss, risk, or disadvantage to the company or to you as a member?

What is “unfair” and “prejudicial” is assessed case by case. A careful analysis of both the legal thresholds and the commercial dynamics will dictate your strategy—whether to push for immediate injunctive relief or a negotiated exit. Whatever your situation, where we’re instructed we position you to maximise your position and bluntly, to win.

Explore Remedies and Legal Pathways for Shareholder Protection

The court has a wide discretion when considering remedies for a breach of statutory duties; the specific facts of the claim will suggest the most appropriate action. The nature of the relief sought must be set out in the petition.Common options include:

• Repayment and compensation: orders requiring the director to account for profits or repay losses to the company;
• Injunctions: urgent orders to halt ongoing misuse, restrict dealings with assets, or preserve evidence. These can be sought on an interim basis where appropriate;
• Removal from office: disqualifying or removing the director where justified;
• Share purchase orders: compelling the wrongdoer to purchase your shares at a fair value, often with an uplift if misconduct depressed the valuation; and
• Derivative claims: where the company itself has a claim but won’t act, shareholders can seek court permission to pursue any breach on the company’s behalf

Frequently Asked Questions

What Is Misuse of Company Assets for Personal Gain?

Misuse of company property for personal gain occurs when a shareholder or director exploits tangible or intangible assets, such as intellectual property, for financial reward or advantage. Harm or loss caused by misusing company assets is a breach of statutory duties with serious legal and financial consequences. 

What Is an Example of Misappropriation of Assets?

A common example is a director using corporate funds to pay personal bills or purchase personal property. 

What Is One of the Most Common Behavioral Signs of Asset Misappropriation?

Most commonly, deliberate asset misappropriation is accompanied by evasive behaviour and a reluctance to discuss certain issues or withholding of account information. Odd or out-of-character behaviour is often the first red flag and a warning to investigate further.

Consult Helix Law for Expert Shareholder Dispute Advice

Shareholder disputes are one of the most frequent issues our commercial litigation team encounter. We work in these disputes nationally, including in reported cases in the High Court ranging in value from tens and hundreds of thousands of pounds in dispute, to tens of millions in dispute. It’s vital to take expert advice as soon as you suspect something may be wrong. Using company assets for personal gain needs to be nipped in the bud to protect the business, with appropriate remedies for any loss or damage suffered. For obvious reasons there is usually a degree of urgency required to prevent the situation worsening. Get in touch with Helix Law today for expert advice and support and we will be happy to assist you.