When there is friction at the board table, everyone suffers.
Disagreements between directors can disrupt decision-making, damage working relationships, harm public perception and, in some cases, threaten the stability of the business itself.
The longer the tension is left to fester, the harder it becomes to resolve.
It can be even more challenging to resolve these matters where a company has only two directors, especially if both hold equal shares.
In this situation, a disagreement can lead to a complete deadlock and important decisions cannot be made if neither director is willing to compromise.
Common reasons behind director disputes
Director disputes are not uncommon, particularly in small and medium-sized businesses, family-run companies and startups.
Some of the main reasons for these conflicts include:
- Personality clashes
- Different views on the direction of the business
- Disagreements over pay and workloads
- Misunderstandings over responsibilities
- Allegations of misconduct
If these issues are not addressed early, they can lead to more serious problems.
In some cases, disputes may involve allegations that a director has breached their duties, thereby exposing individuals to personal liability.
More serious situations can even result in formal disqualification proceedings.
Resolving conflict between directors
There are a few options to consider when hoping to resolve a director’s dispute. The right solution will depend on how severe the situation is and the context of it.
However, the starting point for most disputes (where possible) is usually open communication.
Directors should find a moment to sit down together and discuss their concerns calmly.
For this to work, the focus needs to be on the business and what is best for it, not on any personal grievances that may be at play.
If these discussions don’t result in a solution that all parties are satisfied with, mediation could be the next step.
Involving a trained third party in the discussion can help directors communicate more effectively, providing an impartial viewpoint of the situation.
Without a personal stake in the conflict, the mediator can identify the root cause and work towards a solution everyone can accept.
Keeping accurate board minutes and records ensures a transparent account of what was agreed and why, helping prevent misunderstandings from escalating into formal disputes.
In more serious cases, legal advice may be required.
Solicitors specialising in corporate governance can provide guidance on directors’ duties, shareholder rights and potential remedies, helping to protect both the company and individual directors.
Get expert support with director disputes
We understand that with so much else to attend to when you’re running a business, sitting back and hoping a dispute blows over on its own can seem appealing.
However, ignoring tension is very unlikely to make it disappear, so directors in disputes should aim to resolve matters as quickly and as amicably as possible.
If you feel a director dispute is brewing or you’re in the middle of one, please contact us for support.
