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.
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.
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.
Boardroom disputes and shareholders disputes always have the potential to seriously damage the company in question. One particular problem, particularly in the current financial climate, is that banks may use a dispute as a reason to terminate or curtail a companies banking facilities. The problems can be even worse for listed companies.
Once upon a time, when there was no such thing as personal computers, directors communicated mostly by talking to each other. Occasionally they sent memos but more often than not these were consigned to the bin after reading. The advent of email has changed the way directors communicate and this has changed the landscape for boardroom disputes and shareholder disputes.
There is no such thing as a typical boardroom dispute or shareholders dispute. However there are certain common causes that are at the bottom of most disputes in the boardroom whether in brand name companies (Easyjet for example) or husband and wife businesses.
Barclays bucked the trend amongst the under-capitalised banks when it decided to turn its back on government handouts and go its own way in obtaining capital. It looked like a bold move but now looks like a bad one and threatens to be the cause of a major shareholders dispute.