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.
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The process and impact of resigning as a company director is much misunderstood. The basic rule is “resign in haste, repent at leisure”.
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.
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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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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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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.
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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The more complex personal relationships inevitable in family companies can often give rise to the more intractable and bitter kind of shareholders disputes. Litigation is not the only solution and more often than not it is not the best solution. Mediation is a powerful tool to unlock such disputes as is highlighted in an article recently published by mediator Jon Lang. Click here to read Jon’s article.
It seems that only a few other lawyers find boardroom and shareholders disputes as interesting as I do and therefore the conference in May has been cancelled.
A great shame, but for those who are interested in the subject I will continue to dispense occasional words of wisdom on the subject in this blog.
For those looking for a more detailed analysis of some of the issues touched upon this blog I recommend the Boardroom Disputes - Practical Legal Issues Conference 2011. The conference is organised by CLT and takes place on 18 May 2011 in London.
My recommendation has everything to do with the fact that I am one of the speakers at the conference!
Boardroom Dispute Resolution | Ed Weeks | 
April 12, 2013 3:36 pm | 
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