Shareholder disputes – how to spot the early warning signs and also avoid disputes in the first place

August 29, 2019



Disputes between shareholders are a serious matter. Not only can they be highly disruptive to the business, they can result in the company collapsing, as a result of complicated and acrimonious litigation.

If is often possible to spot the early warning signs of a shareholders’ dispute. If, then, effective steps are taken, it may be possible to prevent the disagreement escalating into a full-blown dispute.

The following types of shareholder behaviour may indicate that a dispute is on the horizon:

1.       Complaining of being excluded from meetings unlawfully

2.       Being regularly disruptive at meetings and antagonistic in correspondence

3.       Speaking “on behalf” of a group of shareholders

4.       Regularly alleging that other directors and shareholders are not performing

5.       Forcefully disagreeing with the business direction of the company

6.       Starting to use legal language when talking about the alleged failure of others

7.       A deteriorating relationship with other shareholders and directors

8.       Calling for frequent board and members’ meetings to suit their own availability

9.       Threatening to involve lawyers in the running of the company

Despite identifying these behaviours, certain factors may prevent you from successfully mediating between the various parties involved. Highly unreasonable behaviour and negotiating positions or serious misdeeds and fraud may make it very difficult to resolve a dispute without legal intervention.

There are of course preventative measures that can be taken which will, in the long run, hopefully go some way to minimising the risk of a shareholders’ dispute developing in the first place. Examples of the kind of steps that can be taken are:

1.       Ensuring that the company’s constitution documents (e.g. Articles of Association) are clear, comprehensive and properly drafted

2.       Putting a shareholders’ agreement into place

3.       Ensuring that the directors are aware of their statutory duties and arranging training if necessary

4.       Putting directors’ service contracts into place

5.       Making sure that all board and members’ meetings are properly called, agendas are circulated in good time and accurate minutes are taken and circulated

6.       Considering establishing sub-committees where appropriate

7.       Taking appropriate legal advice at an early stage

8.       Considering offering to buy-out troublesome shareholders

A dispute between shareholders may be unavoidable. If that happens you should seek legal representation from an experienced lawyer as soon as possible.

Never underestimate the seriousness of a shareholders’ dispute.


Contact Our Team
Catherine Burke
View Profile
Damian Phillips
View Profile
Fflur Jones
Managing Partner
View Profile
Gareth Wedge
View Profile
Mark Rostron
View Profile
Nick O’Sullivan
View Profile
Owen John
View Profile
Rhodri Lewis
View Profile
Stephen Thompson
View Profile

I have worked with Darwin Gray for a number of years and the level of service, professionalism and timely response is second to none. I would highly recommend Darwin Gray to any business.”

Becs Beslee
Dice FM Ltd

Darwin Gray have provided us with a first-class service for many years now. They really take the time to understand our business and develop relationships which results in advice and support that is contextualised and effective.”

Rebecca Cooper
ACT Training

We have worked with Darwin Gray for several years and have always found their services and advice to be first class.”

Karen Gale
Stepping Stones Group

An extremely professional and sincere company who make time for your queries and understand the need to break down certain facts and information to ensure everything is understood perfectly. I would highly recommend the company to anyone looking for any type of legal advice”

Gwawr Booth
Portal Training Ltd

PSS has worked with Darwin Gray for many years. We have always received an excellent service. Prompt and professional advice and support.”

Ledia Shabani
Property Support Services UK Ltd

We have used several departments within DG recently and we have been very pleased with an effective, efficient and down to earth service. Very happy thus far and I expect that we will continue to use DG.”

Guto Bebb
Farmers’ Union of Wales

Darwin Gray offer us truly superb services. Very professional, quick and services available bilingually which is very important to us, highly recommend.”

Iwan Hywel
Mentrau Iaith Cymru

My “go to” in urgent and time sensitive cases for direction, support and advice. The team are quick to respond to calls or emails for advice and support on all matters. Always explain complex matters in a way a lay person can easily understand.”

Margot Adams
Guarding UK Ltd