Director and Shareholder Disputes

The most popular way to set up a business is through a private limited company. However, this brings unique challenges if the people responsible for running the business fall out or start acting dishonestly. 

A business becomes a company simply if it is registered as one, in compliance with the Companies Act 2006. A company is considered as a separate legal entity to the people who own and run it. The rules for running a company are set out in its constitution. A company’s constitution is made up of its Articles of Assocation and other agreements such as company resolutions, shareholder agreements or directors service contracts. 

A company’s directors and shareholders are frequently the same people. Such a business is sometimes called a quasi-partnership but is still a company governed by company law.  

Each position within a company has its own rights and obligations and needs to be considered separately. 

  • Directors are responsible for the management of the company and control it unless overruled by the shareholders. They also owe duties to the company, as set out in ss171-177 of the Companies Act 2006. These duties include working for the success of the company, acting with due skill, care and diligence and notifying the company of any conflicts of interest. Directors are personally liable for any losses resulting from a breach of these duties.  
  • Shareholders own the company. If enough shareholders act together, they can also control the company by overruling directions or dismissing them. Shareholders must receive a fair share of the profits of the company by payment of dividends.  

Disputes between directors and shareholders can be very difficult to deal with, personally, professionally and financially. Set out below is further information on how best to deal with each of three positions you may find yourself in; a majority shareholder, a 50/50 shareholder or a minority shareholder.  

If you are involved in a dispute with your fellow directors and/or shareholders, please book a appointment to speak to us by clicking on Let’s Talk. It’s a chance to speak to a specialist litigation solicitor, without charge or obligation. Alternatively, please contact us by email or telephone. Our contact details are Here. 

If you want more information about timescales and legal costs, please click on the link, which takes you to our page on those subjects.

Question: Are you a director or shareholder of a company that has a dispute in its management or ownership?

If so, please Contact Us