Although directors have day to day control of a company, shareholders (by way of majority vote) hold the ultimate power and can by way of majority vote dismiss directors and can appoint a new board of directors. Whilst, this is all very well, disputes can arise where an unhappy shareholder is not supported by the majority of the shareholders and is in turn classified a “minority shareholder”. It is at this point, minority shareholders will need to consider one of the following remedies:
Shareholders have some personal right which include:
If there is a shareholder agreement in place, then shareholders may have remedies under this agreement which are enforceable against the signatories of the agreement.
However, if these remedies do not assist, a shareholder may need to consider another remedy.
A derivative claim is where a claim is brought by the shareholders in the name of the company. The shareholders’ right to claim derives from the company’s right to claim. In order to bring a derivative claim, claimants need to meet a two stage process. The first stage is to obtain the permission of the court to bring such a claim. To succeed at this stage, the claimant will need to show that they have a potential claim. The second stage involves the court considering a variety of factors which are set out in Section 172 of the Companies Act 2006.
Under Section 122(1)(g) of the Insolvency Act 1986, a company may be wound up by the court if, “the court is of the opinion that it is just and equitable that the company should be wound up”. A shareholder is entitled to apply for such a winding up where there is sufficient interest in doing so. When assessing what amounts to “just and equitable”, the courts consider each case on their own merits. However, cases where winding up orders have been made include the following:
It should be noted:
A powerful remedy for aggrieved minority shareholders is found in Section 995 of the Companies Act 2006.
A shareholder may petition the court where the affairs of the company are being conducted in a manner that is unfairly prejudicial to all or part of its members.
Cases where unfair prejudice has been found include:
It should be noted:
Minority shareholder disputes can be complex and disputes are won and lost based on tactical decisions. Our solicitors can assist you with: