Director Shareholder Disputes

The director and shareholder of a company who had been accused of breaching his director duties and breaching a shareholder’s agreement.

Tensions in this company between the directors had been high for some time. Whilst collectively working for the company, the directors all had very different areas of expertise and skills which often meant them working in a variety of sectors with limited insight into each other’s work and contribution. Individually they therefore took ownership of their area and yet did not see themselves operating together for the company. As a result, when a conflict of interest situation arose during the course of a period of disagreement, it seemed prudent and reasonable for one of the director’s to undertake work in his own personal capacity. Whilst this was a trigger to the dispute, it was not the root cause.

Director shareholder disputes are often very emotive and can quickly become embroiled in legal argument. This may be appropriate in some cases but often resources are limited, so finding a pragmatic commercial solution is a sensible approach for all. We set the scene with the legal framework for the case and our client’s position, however focused upon without prejudice negotiations to resolve the issues at the heart of the dispute and find a way forward. This met our client’s needs in shortening the length of the dispute and offering a cost effective solution.

A settlement agreement was reached between the parties which ultimately meant one of the director’s exiting the business with their shares being purchased.

In conclusion

Whilst it was important for our client to ensure that his legal entitlements were clearly represented and set out so he was protected, offering a negotiated settlement was a far quicker solution. Had the case gone to court, it would have resulted in higher costs and over a much longer period of time but still have secured the same result – sale of the shares from one shareholder to the other. Using this approach, we secured the outcome much sooner. 

For further information and advice, contact the Dispute Resolution Team on 01604 828282 / 01908 660966 or email Litigation@franklins-sols.co.uk.