Shareholders and partnership disputes can be traumatic as well as expensive for those involved as former colleagues and friends fall out and trust between individuals is called into question.
Early professional advice is essential in such cases to enable a reasonable outcome to be negotiated before litigation gets out of hand. Once positions become entrenched and personal differences get blown out of proportion it is easy for a shareholder dispute to become a war of attrition with no ultimate winner as the costs mount outweighing the benefits to either party.
We can provide independent advice on valuation and other issues to enable the matter to be resolved or settled efficiently and cost-effectively.
Disputes arise where minority shareholders consider they are being unfairly treated in respect of the management of the company and/or the dividends paid out by the company.
We can advise on the particular circumstances giving rise to the unfair prejudice of individual shareholders. It is important this is sought at an early stage so that the proper perspective can be brought to a case. Sometimes actions which appear to be unfair can be perfectly reasonable when viewed from a different angle.
The Companies Act 2006 includes specific provisions to deal with such situations although litigation can be a difficult matter.
We have previously advised both the company and the minority shareholders in such cases typically reviewing the issues which give rise to the “unfair prejudice” and assessing the valuation of minority interests.
Sadly when shareholder directors retire or leave the company to pursue other interests, disputes often arise over the terms on which they leave and in particular, the value of their shares.
In some cases, there will be a shareholders' agreement or detailed clauses in the Articles of Association which give guidance on the value to be applied. However, even in these situations, there may still be significant areas of dispute regarding the interpretation of specific clauses.
Where there is no shareholders' agreement then arguments arise over the value of the company and also whether the shares should be valued at a significant discount to the pro-rata value of the company. There is no right or wrong answer as it depends on the particular circumstances of the company.
We have advised in many such situations on the value of a shareholding and on the interpretation of any relevant clauses in the Articles of Association and/or the shareholders' agreement.