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Director Disputes

Legally reviewed by:
Wyn Legal team

Companies rely on directors for leadership and direction. However, there are times when directors cannot agree on the management and direction of the company. In these circumstances, a dispute among directors may arise.  A protracted director dispute is likely to be damaging to a company and therefore, where possible such matters need to be dealt with efficiently.

There may be a wide range of reasons as to why directors are in a dispute with each other. Examples of common reasons for director disputes include:

  1. A breach of the duties of a director. Directors have several statutory duties including acting in the best interests of the company, avoiding conflicts of interest, maintaining confidentiality and working for the success of the company.  Where a director fails in complying with one or more of these duties, a dispute could arise.
  2. Disagreement surrounding the direction of the company. Where there are multiple directors, the parties may not be able to agree a general direction for the company which can result in significant dispute. 
  3. Dividend and Payments. Money tends to be a common reason for disputes between directors. With directors potentially entitled to dividends, there could be a disagreement as to the value of the dividends being issued to directors. In addition to this, differences in the contribution each director makes to the business can also be the basis of the dispute.

If you have found yourself embroiled in a director dispute, you consider the following questions:

  1. Is there a disagreement about strategy of the company or is the substance of the dispute more serious, such as a director being in breach of their fiduciary or contractual duties?
  2. Are the directors involved in the dispute also shareholders?
  3. Are you seeking the removal of the director?
  4. What liabilities and risks might occur if a director dispute escalates? 
  5. Is there likely to be a deadlock, whereby directors and shareholders’s vote are equally split.

If you are involved in a director dispute, we can assist with the following:

  1. In the first instance we can assist in facilitating a mediation or a form of alternative dispute resolution in a bid to conclude the dispute. However, if this does not resolve matters, we may need to escalate matters. 
  2. Removal of the director from the board. It would be important to follow the correct procedure in taking steps to remove a director from the board.
  3. Where the director is also an employee, steps will need to be taken in following the correct procedure in terminating the director’s employment.
  4. Where the director is also a shareholder, we can assist in looking at the merits of retrieving the director’s shares.

Our solicitors can assist resolve a director dispute by:

  1. Having an initial discussion about the matter.
  2. Provide an initial view as to the strengths of your case. 
  3. Providing you with advice into the options available to you in an attempt to resolve matters.
  4. Partaking in early negotiations or mediation with a view of resolving matters. 
  5. Assisting you through the court proceedings should this be necessary.