In owner managed companies, where the directors are also shareholders, there is always the potential for conflict between the two roles. A recent court of appeal case (Dear & Griffith -v- Jackson [2013] EWCA Civ 89) shows how the court can sometimes struggle with resolving this conflict.
In simple terms what happened is party A and party B co-founded a company which held the voting shares in another company (C). A and B entered into an agreement that the voting shares would be used to appoint A as a director of C at each AGM of C.
This is what happened for a couple of years but then the other directors of C, including B, exercised a right under the articles of C to dismiss any director by written notice of all other directors. As a result A was not re-appointed.
Read more »
The process and impact of resigning as a company director is much misunderstood. The basic rule is “resign in haste, repent at leisure”.
A recent court case has reduced the risk on the part of company directors / shareholders involved in divorce proceedings that assets held by a company which they control will be made the subject of a court order for sale.
Read more »
Phew - it is 3 months since I last posted anything on the subject of boardroom bust ups and shareholder disputes. Too busy with my sleeves rolled up fighting battles on behalf of beleaguered clients!
Here are some things I learned in 2012 about shareholder disputes.
Read more »
A recent article about legislation that enables the government to raise the level of fines imposed in Magistrates Courts for ‘regulatory’ criminal offences caused to me recall how widespread these offences have become. Directors need to be aware that failure to comply with regulatory requirements can result in a Magistrates Court attendance and hefty fine.
Read more »
A typical claim in a shareholders dispute is when a majority shareholder in control of a company prejudices a minority shareholder by improperly extracting value out of a company. This can be done in different ways, for example by payment of excessive salary or by sale of company assets to connected parties at a low value. Sometimes this can leave the company insolvent. Given that the principal remedy for unfair prejudice is an order requiring the majority shareholder to buy out the minority shareholder it appears to leave the minority shareholder in a no-win situation as the shares are effectively worthless. However, the court will step in to do justice in such a situation and this has been confirmed in the recent Court of Appeal case of Maidment -v- Attwood and others.
Read more »
The basic rule in relation to a board of directors of a company is that they must act collectively. In other words, decisions must be made on the basis of majority rule. In most companies the strict application of this rule is not practical as this would stifle the day to day management of the company. For this reason powers are often delegated to particular board members (or senior managers). Often wide-ranging powers are delegated to the Chairman or Managing Director. However, you should not assume that a person using either of these titles actually possesses such powers, it is by no means automatic.
Read more »
The rights of shareholders to curb excessive executive pay is an increasingly hot topic. When even the Institute of Directors publishes a survey showing that executive pay is out of kilter with performance then you know that there is a problem. As for shareholder rights in attacking excessive remuneration, the practical effectiveness of such rights depends upon the size and nature of the company in question.
Read more »
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).
Read more »
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.
Read more »
Boardroom Dispute Resolution | Ed Weeks | 
April 12, 2013 3:36 pm | 
Comments (0) 
Subscribe