If a shareholder dispute is resolved by one party buying out the other’s shares then the value of those shares must be agreed or, in default of agreement, determined by an expert valuer. The perils of the company’s auditors carrying out this function has been previously noted (see this post) but there is also the risk of the expert simply failing to deliver what they are required to, for good cause or not. What happens then? The matter was considered in the case In the Matter of Minrealm (& ors), Bishlawi & anor -v- Soliman & ors [2012] EWHC 343 (Ch).
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The Supreme Court has upheld the Court of Appeal decision in Fulham Football Club (1987) -v- Richards affirming that a proper arbitration clause will exclude the option of bring an unfair prejudice petition (see previous post in this respect). The judicial approval of this option means that it is more likely that arbitration clauses will start to appear in shareholders agreements.
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Whilst the title to this post risks yet more strange comments clogging up my spam filter there is a serious point to be made. Many people are unaware of the rights that they have as a small shareholder in a company. These rights are hidden away in the Companies Act 2006. Sometimes these rights can give minority shareholders leverage in the company they did not know they had.
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Most disputes that come to lawyers are, almost by definition, problem disputes. The route to resolving the problem, the rights and wrongs and often even the scope of the dispute are often unclear. How you present the case at the early stages will determine whether a quick deal is possible or you are going to have to grind out a solution. A well timed bluff can be a useful tactic.
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There is a received wisdom that litigation lawyers do well out of economic downturns. Yet another reason to dislike lawyers!
However, the reality is a little more complicated. Whilst bad economic times can result in an increase in certain types of litigation (insolvency and banking disputes are an obvious example) in many other areas the position reflects the the health of the sector itself. This is true, to an extent, in relation to shareholders disputes.
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The 2012 edition of Chambers Directory has now been published and once again Cripps Harries Hall LLP are ranked in the top band for litigation in Kent & Sussex.
See - Dispute Resolution - The South - Kent & Sussex in the online edition.
My own specialism in boardroom and shareholder disputes is also recognised, the directory confirming my “considerable expertise” in this area. This recognition is particularly welcome as Chambers takes time to sound out other lawyers as well as clients in coming to their assessments.
Directors must act in the best interests of their company and must not allow their personal interests to come into conflict. There are common law fiduciary duties as well as rules under the Companies Act 2006 to this effect. A recent case involving the Dragon’s Den star Theo Paphitis is a good illustration of the risks directors take when it is perceived that their own interests are being served by a transaction rather than those of the company.
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If you are looking for a lawyer with expertise in a particular area then a good starting point is to look at the leading legal directories.
The latest edition of the Legal 500 directory in the UK has recently been published. I am pleased to report that the expertise of my firm and myself in the areas of commercial litigation, and specifically shareholders disputes, continues to be recognised.
Click on the the following link to visit the Legal 500 online.
The law in relation to unfair prejudice which flows from s.994 of the Companies Act 2006 applies to Limited Liability Partnerships (LLPs) as well as companies.
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Further to my previous post on this subject the Court of Appeal have upheld the decision in Fulham Football Club (1987) Ltd -v- Richards and confirmed that arbitration clauses in shareholder agreements will be enforced. Arbitration is an effective way of resolving disputes but minority shareholders in particular should be wary of agreeing to an arbitration clause in a shareholders agreement.
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Boardroom Dispute Resolution | Ed Weeks | 
April 23, 2012 2:23 pm | 
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