Relations between the directors or shareholders of a company are not always perfect. Frictions can arise when one director is not felt to be contributing to the business as they should, or taking more money out of the business than was agreed, or when there are disagreements about the direction of the business. Trust can break down.
In the early days of a company when it was first set up, the parties may not have taken advice about a shareholders’ agreement or the articles of the company. It may only be when a dispute arises that they take advice. In the absence of a shareholders’ agreement, it may be more difficult to resolve issues about payment of dividends, and a deadlock situation might arise between co-directors and shareholders whereby no decisions can be taken. Company directors may be breaching their directors’ duties. We can advise companies, shareholders and company directors on this type of issue and explore the options for resolving it.
Options for resolving a deadlocked dispute might involve agreeing on a financial settlement whereby one party leaves the company as a director, shareholder and employee. Alternatively, the leaver might wish to continue as a shareholder but give up a day to day involvement in the operation of the business, or the business might be sold to a third party, or wound up and cease to trade. Court proceedings might ultimately be needed. The appropriate solution and outcome depend on the appetite to continue with the business, the willingness of both parties to resolve matters, and financial resources. A professional valuation of the business will probably be necessary if a settlement involves a sale of shares.