How Majority Shareholders Can Resolve Disputes with Fellow Shareholders and Directors

Jonathan Lea October 29, 2025

Disputes between shareholders and directors are common in private companies, particularly where personal relationships overlap with business ownership. Even in profitable, well-run enterprises, friction can arise when one party feels sidelined, under-rewarded or misled.

For majority shareholders, such disputes can threaten both commercial control and personal reputation. The challenge lies not only in understanding the legal rights and remedies available, but also in managing the human dynamics that drive conflict. Taking early, informed advice and approaching the situation strategically can preserve both company value and working relationships.

Understanding Majority Shareholder Rights in Private Companies

Majority shareholders – typically those holding more than 50% of the voting rights – have significant influence over how a company is run. However, their powers are not absolute.

Under the Companies Act 2006, decisions must still be made in good faith and for the benefit of the company as a whole. Majority shareholders who are also directors must comply with fiduciary duties, including duties to act honestly, avoid conflicts of interest and promote the company’s success.

While a majority position allows control over most decisions, acting heavy-handedly can expose you to counter-claims, including unfair prejudice petitions from minority shareholders. A legally sound strategy combines assertive protection of your rights with careful adherence to procedure.

Common Causes of Shareholder and Director Disputes

Every dispute has both commercial and personal dimensions. The most common triggers include:

Unequal input and effort. One director-shareholder may feel they are carrying the business while others contribute little, leading to resentment over salaries or dividends.
Strategic divergence. Partners may disagree over growth priorities, investment appetite or long-term direction, especially when the business matures beyond its start-up phase.
Money and control. Disputes often flare around dividend policy, company loans or access to financial information.
Breakdown of trust. Perceived secrecy, unilateral decisions or off-the-books arrangements can rapidly erode confidence.
Exit or succession disputes. A shareholder who wishes to retire or cash out may clash with others over share valuation, repayment terms or replacement leadership.

Recognising that emotion, pride and fear often sit behind these disagreements is essential. Addressing the psychological drivers can make resolution far more achievable.

Reviewing Your Shareholders’ Agreement and Articles of Association

Before reacting impulsively, review the legal framework that governs your company. A well-drafted shareholders’ agreement and articles of association will often provide a roadmap for resolving disputes.

These documents usually cover:

Decision-making processes: including which matters require unanimous consent and which can be determined by majority vote.
Transfer of shares: including pre-emption rights, drag-along and tag-along provisions, and buy-back mechanisms.
Deadlock or dispute resolution procedures: often mandating mediation, arbitration or expert determination before litigation.

If no agreement exists, or the existing documents are outdated, now is the time to have them reviewed. A proactive update can prevent ambiguity and future conflict.

Negotiating Effectively: Balancing Commercial Logic and Human Emotion

When disputes arise, legal rights alone rarely solve the problem. The success of any resolution often depends on how you communicate and how others perceive your intentions.

Separate people from the problem. Focus discussions on the business issue – not personal grievances. Framing concerns objectively (“we need clarity on dividend policy”) rather than emotionally (“you’re taking too much out”) reduces defensiveness.
Acknowledge emotional realities. Even rational businesspeople can feel threatened when control or reputation is at stake. Recognising this openly can defuse tension and make others more willing to compromise.
Use active listening and neutrality. Allow your co-shareholder to express frustrations fully before responding. People are more open to settlement once they feel heard.
Propose structured mediation. A professional mediator can guide communication, reframe issues, and test potential solutions in a neutral, confidential environment. Many shareholder disputes resolve within a day of structured mediation once emotional energy is channelled productively.
Control the pace and tone. Avoid escalating language or rushed ultimatums. Calm, deliberate correspondence through your solicitor signals professionalism and strength.

Approaching negotiation with empathy and composure can preserve relationships while protecting your legal position – a balance courts often reward.

Using Your Legal Rights as a Majority Shareholder

If negotiation fails, majority shareholders retain powerful legal tools, provided they are used carefully and lawfully.

Call a general meeting. As a majority shareholder, you can usually convene a meeting to propose and pass resolutions, including changes to company officers.
Remove a director. Section 168 of the Companies Act 2006 allows removal of a director by ordinary resolution, subject to proper notice and fair procedure.
Enforce director duties. If a director acts in breach of fiduciary obligations, such as diverting opportunities or misusing funds, you can compel repayment, removal or other remedies.
Seek relief from minority obstruction. If minority shareholders act in a way that unfairly prejudices the company, you may apply to court under section 994 of the Companies Act for an order to buy them out or regulate conduct.

Legal enforcement should be a last resort but remains essential to protect company stability and ensure compliance when diplomacy fails.

Protecting Control and Value in the Long Term

Preventing future conflict is as important as resolving current issues. A strong governance framework protects both majority control and business value:

Director service contracts. Each working director should have a contract specifying duties, hours, remuneration and termination rights. This makes expectations transparent and enforceable.
Buy-back and compulsory transfer rights. Your shareholders’ agreement should enable the company or remaining shareholders to buy out an inactive or disruptive shareholder at fair value. To ensure completion, include a power of attorney authorising the board to execute any necessary share transfers if a defaulting shareholder refuses.
Different share classes. Creating non-voting or preferential shares allows investors or family members to benefit financially without diluting control. It also provides flexibility in dividend distribution.
Clear workplace policies and culture. Establish ethical, transparent policies applying to all staff and directors. Clear behavioural standards reduce misunderstandings and promote trust, especially where personal relationships exist within ownership.

By implementing these safeguards, majority shareholders can manage risk, attract investment and preserve long-term company harmony.

Seeking Expert Legal and Strategic Advice

Each shareholder dispute is different. The right solution depends on your share structure, company documents, personalities involved and commercial objectives.

At The Jonathan Lea Network, we combine legal expertise with commercial and psychological insight. Our team regularly advises majority shareholders and company directors on how to resolve disputes efficiently, from private negotiation and mediation through to formal litigation when necessary.

We understand that these conflicts are not purely legal; they are often emotionally charged, involving trust, identity and control. Our goal is always to protect your position while finding the most constructive and cost-effective path forward.

If you are a majority shareholder facing a dispute with a fellow shareholder or director, contact us for an initial consultation. We can help you understand your legal rights, develop a clear negotiation strategy, and secure the best outcome for you and your company.

We offer a no-cost, no-obligation 20-minute introductory call as a starting point or, in some cases, if you would just like some initial advice and guidance, we will instead offer a one-hour fixed fee appointment (charged from £250 plus VAT to £350 plus VAT* depending on the complexity of the issues and seniority of the fee earner).

Please email wewillhelp@jonathanlea.net providing us with any relevant information ensuring that any call we have is as productive as possible or call us on 01444 708640. After this call, we can then email you a scope of work, fee estimate (or fixed fee quote if possible), and confirmation of any other points or information mentioned on the call.

VAT is charged at 20%.

This article is intended for general information only, applies to the law at the time of publication, is not specific to the facts of your case and is not intended to be a replacement for legal advice. It is recommended that specific professional advice is sought before relying on any of the information given. © Jonathan Lea Limited.