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.
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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.
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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.
Who do you need if you are married couple who share ownership of a business or you are the owner of a business and divorce is in the offing? Do you need a good divorce lawyer or a good company lawyer?
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Shareholders Agreements are very useful tools that can stop disputes arising or help resolve them quickly and cheaply. However a recent case has highlighted a potential concern.
If your shareholders agreement contains an arbitration clause then there is a risk that you will be deprived of all the remedies that you might otherwise have under s.994 of the Companies Act. This means that caution should be exercised before inserting such a clause into a shareholders agreement.
Click here for a detailed article on this subject.
Few small or medium size businesses operate to the letter of their Articles of Association (”Articles”). This is not that surprising given the technical language and complexity of many of these documents. Even where the directors and shareholders are aware of the terms of the Articles the requirements can seem technical and have little relationship to the day to day business of making money. Because of this the Articles are more often observed in the breach. Most of the time companies get away with this relaxed approach but in the event of a shareholders dispute or a dispute between shareholders and directors then the first thing a lawyer is likely to do is get hold of a copy of the Articles and digest the contents. This can lead to some unpleasant surprises.
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Boardroom Disputes, Shareholders disputes | Ed Weeks | 
January 4, 2013 9:52 am | 
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