Harper James advises shareholders and companies on disputes under the laws of England and Wales. The appropriate remedy depends on the shareholder’s rights, the company’s constitution, the conduct in dispute and the commercial objective.
A shareholder can bring a derivative claim on behalf of the company where directors have breached their duties and the company has not taken action. Any damages or other relief generally belongs to the company, not the individual shareholder. A shareholder can also seek an injunction, damages, an account of profits or an order requiring the company to take, or stop taking, a particular action. The articles of association and any shareholder agreement are central to assessing these options.
An unfair prejudice petition under the Companies Act 2006 addresses conduct that unfairly harms a shareholder’s interests in the company. Common examples include exclusion from management where participation was agreed, issuing shares to dilute an existing holding, or using company assets for improper purposes. The court has broad remedial powers, including ordering one shareholder to buy another’s shares, usually at a valuation determined by the court.
A shareholder can seek a just and equitable winding-up order where the relationship between shareholders has broken down in circumstances that make it unfair for the company to continue. Winding up is a final remedy and can destroy an otherwise viable business, so the court generally considers whether a buyout or another remedy is more suitable. Contractual claims, mediation, a petition concerning an invalid corporate decision, and claims against directors personally may also be relevant.
The practical process usually begins with reviewing the articles, shareholder agreement, board minutes, cap table, correspondence and financial records. The shareholder then identifies the legal breach, preserves evidence, assesses valuation and funding, and considers a letter before action or mediation. Court proceedings require careful analysis of cost, timing, confidentiality and the effect on the company’s trading operations. A negotiated share purchase can often resolve the dispute without determining every allegation, but its terms should cover valuation, payment, releases, control and the transfer of shares.