Posts tagged: s.994 Companies Act 2006
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.
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.
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.
If you are involved in a shareholders dispute there can be a temptation to do nothing and hope that it all blows over. Sometimes this is just what happens and it is the right thing to do. However, a failure to grasp the nettle can also have unfortunate consequences. You might find that your shareholders rights have been significantly diminished by a delay in taking action.