Boardroom Disputes – Getting Along with the Other Shareholders

As businesses evolve, the once cooperative boardroom can become splintered with shareholders having different interests and opinions.

Issue can arise when you are a board member, company director or shareholder.

A boardroom dispute can arise for many reasons. It could relate to one aspect of the business or several. The reasons can be complex or relate to simple, often personal issues.

The issues could be financial, but they could also be about personalities and conflicts between parties. If you are involved in a dispute it is easy to find yourself at the mercy of someone else’s actions.

However, it is possible to take charge and seek legal advice from a specialist solicitor who has experience in this area of law. Here are some things

What have I done wrong?

It might not be your fault at all and you may have been dragged into the dispute without any prior warning even though you have done nothing wrong at all.

In some cases, shareholders will bring a claim against a company director for something that has happened, even though the director was not involved in the incident at all.

The claim might be that they should have been more aware of what was going on in the company and they should have prevented it from happening instead of leaving it for others to deal with.

Someone who is not a party to the dispute might be dragged into it because they are a company director or shareholder. 

Disputes can be created by the existence of competing interests between shareholders, or between shareholders and directors. They can arise where one shareholder has interests in other companies, which may conflict with the interests of another shareholder.

Find the cause of the dispute

On the other hand, disputes can also occur where there are no competing interests involved, but nevertheless there is poor personal relationship between shareholders or between shareholders and directors. The easiest way to prevent this from happening is to make sure that all parties involved have a clear understanding of what is expected from them before they enter into a contract.

Articles of association

The main objective of a company’s articles of association is to govern how it will be run, and provide a framework for decision making. They also state how these decisions will be made and who can participate in making them. It is important that they are agreed by all those who have an interest in the business.

Some of the key areas covered by “articles” incldue:

  • Shareholder’s rights
  • Director’s duties and powers
  • What happens if the company becomes insolvent?

The general running of the business can include issues at a more granular level for example: How much notice do shareholders have to give if they wish to object to something? Objections could include issues like a director being paid too much or wants to spend money on an overseas trip for a marketing event.

Resolving disputes

Disputes can come from a variety of sources, including employee disputes, partnership disputes, shareholder disputes and many others.

In any dispute, the goal is to identify the real issue at stake and then take action to resolve it as quickly as possible. The longer you wait to deal with a dispute, the more time it gives itself to fester and escalate.

To avoid boardroom disputes, therefore, you need to understand your legal rights and obligations from the outset, and know how best to enforce them. These rights may be different depending on the type of business you are involved in. You may need to take specialist advice based on your particular circumstances.

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