Dispute Resolution Options For Shareholder Agreements

dispute resolution options for shareholder agreements

Shareholder and partnership disputes can arise for a variety of reasons. Disputes between shareholders can become a serious issue as they can prevent the normal functions of a company and affect the value of its shares.

Shareholder dispute solicitors know that the initial task at hand will be to identify the terms of the shareholders’ agreement. It is typical for parties to have taken legal advice at the outset of their business relationship and had a shareholders’ agreement or joint venture agreement drawn up. It is not always this straightforward, however. Shareholder disputes often occur when the parties have commenced their venture together on a “handshake” basis.

Where friends or family are concerned, or in the case of a successful start-up business with humble beginnings, there may be no written agreement, meaning the parties’ rights and obligations are not conveniently set out in one place. This usually means piecing together the terms of the agreement from past conversations and written communications. It can seem difficult, but it is an essential task that litigation solicitors should look to perform with precision.


The benefits of a written shareholder agreement


Shareholder and joint venture solicitors can assist in the negotiation, drafting and overseeing of shareholder documents. Our commercial and corporate team know that a professionally drafted shareholders’ agreement is crucial in order to define and protect the rights of both individuals and businesses that are looking to enter into a corporate joint venture or invest in a private limited company.

Without a shareholders’ agreement or joint venture agreement in place to govern these key aspects of a commercial relationship, the rights of the parties can be much more uncertain when disputes arise.


Shareholder and joint venture disputes


Our shareholder dispute litigation team have expertise in the following shareholder disputes:

  • 50/50 shareholder deadlocks– often arising where no written shareholders’ agreement exists, the shareholders cannot agree on how to take the company forward, and no shareholder has the majority vote required to make key decisions. Communications between the parties have often broken down in these situations. Our corporate solicitors have negotiated amicable resolutions to the most difficult of 50/50 deadlock cases.
  • Unfair prejudice claims– notwithstanding the existence of a shareholders’ agreement, shareholders can obtain statutory remedies under Part 30 of the Companies Act 2006. This is where the company’s affairs have been conducted in a manner that is unfairly prejudicial to the interests of shareholders. Unfair prejudice petitions are common, especially in minority shareholder disputes, and courts have the power to order that an affected shareholder be bought out by the company or the other shareholders.
  • Disagreements as to funding– Sometimes, a joint venturewill require further capital contributions from the major shareholders or partners. Disputes can arise where there is no clear agreement as to how the venture will be funded beyond initial capital contributions. Funding stalemates can destroy the value of a venture if they are not resolved efficiently.
  • Derivative Actions – This is a type of negligence claim which can be brought against a director for breach of duty. These claims are usually brought under Part 11 of the Companies Act 2006. Once the derivative claim has been issued at court, the court’s permission must be sought before any further steps in those proceedings can be taken. 
  • Intellectual property disputes – A dispute may arise in a joint venture agreement regarding ownership of intellectual property created by one party to the agreement.


Dispute resolution options for shareholder agreements


There are a range of dispute resolution options for shareholder agreements. Expertly drafted shareholders’ agreements that are put in place can help to prevent partnership disputes from occurring by regulating the relationships between the company and shareholders. Shareholders’ agreements can also help to resolve disputes if they do arise. This is because they can provide a precise statement of the original agreement between the parties involved in a dispute.

LLP members agreements may also be put in place between the members of the limited liability partnershipLimited liability partnership agreements are legally binding contracts that outline the responsibilities, rights, duties and liability of each member, as well as detailing how the partnership will be managed and run. Limited liability member agreements are governed by the default provisions laid out in the Limited Liability Partnerships Act 2000.

Another way of resolving shareholder disputes includes arbitration, mediation or an early neutral evaluation of the dispute. These are forms of Alternative Dispute Resolution (ADR) that can be used as methods of resolving legal disputes instead of using Court litigation proceedings. These methods are more time-efficient and can be better at taking both parties’ business interests into account whilst being cost effectively appropriate.

Alternative dispute resolution can be a preferable approach to shareholder disputes for some clients. ADR can avoid further management time and business disruption as well as being more cost effective compared to court proceedings. Alternative dispute resolution can also help to prevent business relationships from breaking down entirely as it promotes communication between the parties.

If these methods prove to be unsuccessful, our shareholder dispute lawyers have the experience needed to guide you through the court proceedings.


How can South Bank Legal, shareholder agreement solicitors, assist?


Our shareholder and partnership dispute solicitors handle a range of disputes. In cases large or small, we consider that it is crucial to control the costs of litigation to ensure that perspective is not lost and that legal costs do not grow out of proportion to what is at stake.

Shareholder and business disputes often require subtlety and expertise in order to secure an appropriate way forward. Therefore, it is essential to have a highly experienced shareholder dispute solicitor on your side to assist all parties involved to reach a resolution in a timely manner. At South Bank Legal, our shareholder dispute solicitors can provide expert legal advice on how to proceed with your shareholder dispute case.

Our UK commercial law firm is authorised and regulated by the solicitors regulation authority. Our partnership dispute lawyers can offer legal services to those located in England and Wales. We have offices located in Central London.

We offer our services on a wide range of commercial issues. These include intellectual property disputes, employment law, contract disputes, and property disputes.

If you are a shareholder or partner in a venture and wish to understand further dispute resolution options for shareholder agreements, you can contact South Bank Legal via email at info@southbanklegal.com or telephone 0203 1266 584 for a confidential discussion with a shareholder dispute solicitor or our commercial disputes team today.

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