Shareholder Disputes

Advice for shareholders

You are a minority shareholder i.e. you own less than 50% shares in a company. You are unhappy. The majority shareholder (who is a director) is not running the business properly.

Indeed, he seems to have his own agenda:  Business opportunities are going elsewhere; property is being sold at an undervalue; you are being excluded from the management; he has forgotten that you were supposed to share management

What can you do?  You might be able to persuade the Court that you are suffering from "unfair prejudice" and then the Court has wide powers under section 459 Companies Act 1985 to order that he buy out your shares, that you buy out his shares or that the company be wound up

Often, the most problematical question is to work out not who will buy out whom, but the price at which the shares will be bought

Hopefully you will have a Shareholders Agreement in place, setting out a formula, so that the calculation of the price is purely a mathematical question

If not, then you may well need advice from a specialist business valuer as to the value of the shares, taking into account the principles enunciated by the Court

Much will depend upon the type of company and business you are in. For some companies a "net asset value" valuation is appropriate, for others an "earnings" calculation should be used and for yet others still a hybrid methodology is necessary

Mediation should always be considered