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Resolution of Shareholders' Disputes

Resolving Shareholders' Disputes

An amicable solution to a shareholders' dispute may prove impossible. Shareholders may be unable to overcome opposition from others within the company subject to provisions in a shareholders' agreement or in the Articles of Association. However, creative solutions may present themselves:


The aggrieved minority shareholder may want to sell his shares. Ideally, the majority shareholder is willing to buy at a fair value. If not, the Articles of Association may give the minority shareholder the right to require the company to buy its shares at a fair value fixed by the auditors, or (more rarely) the right to wind-up the company.

The Articles of Association may also allow the aggrieved minority shareholder to offer his shares to the majority shareholder at a specific price. If the majority shareholder refuses the offer, the minority shareholder can then buy those of the majority at that price.

Without such mechanisms in the Articles of Association or in a shareholders' agreement, the minority shareholder may find himself locked in to the company at the mercy of the majority shareholders.

Buying out a minority shareholder holding a significant percentage of the shares may impose severe financial strain on the other shareholders and the company. Where a public company proposes giving financial help to the other shareholders, this may be prohibited financial assistance and expert professional advice should be taken at the outset.


Where a company has separate businesses, it may be possible to demerge the business so that the company is split with the two businesses owned by separate groups of shareholders. There may be other methods by which the assets of the company can be distributed to the participants by way of settlement. Any such arrangements have complex company law and taxation implications and these should be explored at the outset.


A shareholder can also ask the Court to wind up the company on grounds that it is just and equitable to do so under S.122(1)(g) of the Insolvency Act 1986. There is no simple definition of what circumstances make it “just and equitable” for a court to wind up a company.  Each case will turn on its facts.  In a small company which in practice operates as a partnership between two or more participants who are both shareholders and directors, winding up may be the most attractive option. This procedure involves liquidation of the company and is not an attractive method to resolve an internal dispute, it should be used only where all else fails.

It should be noted that this is an equitable remedy which is in the court’s discretion. This means that a person seeking the remedy must come to the court with “clean hands”. If they have done something to cause the damage then the court is much less likely to assist.

It should also be noted that even if a case for winding up on equitable grounds is clearly established, the court may refuse to grant the relief on the basis that there is an alternative remedy and it is unreasonable for the claimant not to pursue that remedy.




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