Dealing with a shareholder dispute – here’s what you need to know - Palmers Solicitors

Dealing with a shareholder dispute – here’s what you need to know

Dealing with a shareholder dispute – here’s what you need to know

Entrepreneurs rarely go into business together expecting to fall out at a later date, but unfortunately, shareholder disputes can – and do – arise for many reasons and it is important that entrepreneurs are prepared for all eventualities.

When a dispute arises, this can prove incredibly stressful for everyone involved, which is why it is important to seek specialist advice at the earliest possible opportunity.

Whether one shareholder has had a change of heart about the business, another has extracted money from the company without consulting the other directors, or shareholders simply no longer wish to work with one another anymore, disputes can turn ugly very quickly.

Luke Morgan, a Director with Palmers who specialises in commercial dispute resolution, said: “Regardless of the circumstances, it is important to ensure that everyone involved remains calm and doesn’t make any rash decisions which could later prejudice their position or have negative implications for the wider business.

“More often than not, disputes of this kind can be resolved using a company’s articles of association or a written shareholder’s agreement – assuming that such an agreement has previously been put in place.

“A shareholders’ agreement lays out the relationship between shareholders, and carefully documents what will happen if any difficulties arise.

“This means that, in the event of a dispute, shareholders will need to act in accordance with what has been previously agreed. In this respect, these agreements can massively reduce arguments and any subsequent collateral damage to the business.”

Luke added: “It is always wise for all shareholders to meet and draw up such an agreement at the earliest possible opportunity. Shareholders’ agreements can always be amended as and when business circumstances change and having such a document in place can prove vital in the event of any future disputes.”

If you have found yourself locked in a dispute with your shareholders, or would like specialist legal advice with regards to setting up a shareholder’s agreement, please get in touch with our expert team for expert advice.