INSIGHT: Shareholders, directors and partnership disputes

Posted on October 8, 2015

Running a business can be difficult and disputes with clients, suppliers and other third parties will occur from time to time.

But what about internal disputes? What happens when directors, partners or work colleagues fall out? Working closely with others can give rise to resentment and, as the old saying goes: familiarity can breed contempt. People who start a business as friends, can soon start to antagonise each other, particularly if the business starts to falter. Against such a background, even small disagreements can quickly escalate into disputes that are damaging and costly for the business.

The following are some of the causes of shareholder, director and partnership disputes on which we have advised:

it is discovered that a director is in breach of their duties to the company. Such breaches can take various forms but a common one is taking money out of the business without authority;
the nature of the business changes and one director’s/partner’s skills have become less valuable;
one director/partner is better at winning work than others and expects more recompense;
the business needs further investment but only one director/partner has available funds to invest;
one director/partner contributes less/more hours to the business than another; or
one director/partner is left to shoulder the burden of difficult decisions – such as redundancies.

If you recognise any of the above examples, be pro-active: do not let resentment fester. There are various options you can take such as redefining roles, renegotiating salary packages or agreeing to annual or one-off bonus payments. In some cases, the only solution will be to agree an exit strategy from the business.

Whatever the situation, each party has legal rights that will affect their negotiating position. If in any doubt, seek legal advice. A solicitor can help to negotiate the best possible outcome for the parties… and the long term health of the business.

For more information, contact Christopher Burke on 0161 785 3500 or christopher.burke@pearsonlegal.co.uk or click here Shareholder Disputes

Also in this issue of Insight

Please note that the information and opinions contained in this article are not intended to be comprehensive, nor to provide legal advice. No responsibility for its accuracy or correctness is assumed by Pearson Solicitors and Financial Advisers Ltd or any of its members or employees. Professional legal advice should be obtained before taking, or refraining from taking, any action as a result of this article.

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