Shareholder and Director Disputes Solicitors

Protecting your interests with practical, expert and cost-effective legal advice

At The Jonathan Lea Network, we understand that relationships can become strained, especially in smaller businesses and family-run companies, where roles often overlap. Shareholder and director disputes in such close-knit environments can have significant financial, operational, and reputational consequences. When trust breaks down, swift, strategic and experienced legal intervention is essential.

Whether you are a director, a shareholder, or both, our team is here to help you resolve disputes effectively. We provide clear guidance, protect your interests, and support your long-term business goals.

Understanding Shareholder and Director Disputes

In many SMEs, directors and shareholders are the same individuals. However, it’s not uncommon for there to be passive or minority shareholders who do not have direct involvement in the day-to-day running of the company. Disputes often arise when these shareholders feel their rights have been ignored or when directors are perceived to be acting improperly.

Common Causes of Shareholder and Director Disputes

While each dispute is unique, we regularly see a number of recurring themes across small and medium-sized enterprises. These causes are often interlinked and escalate quickly without proper governance or early legal intervention.

1. Breach of Directors’ Duties

At the heart of many disputes are concerns that directors have failed to comply with the core obligations set out in the Companies Act 2006. Directors must act in the company’s best interests, avoid conflicts, and exercise reasonable care and diligence. Breaches can include:

• Failing to act within the powers granted in the company’s constitution
• Using company funds for personal gain or unauthorised purposes
• Pursuing private business interests in competition with the company
• Accepting third-party benefits that create conflicts of interest
• Not declaring personal interests in proposed transactions

Even when a breach is not clear-cut, the perception of wrongdoing can create lasting divisions among stakeholders.

2. Lack of Transparency and Financial Mismanagement

Shareholders are entitled to a reasonable level of visibility into how a company is performing and how its finances are being managed. Disputes often arise when:

• Company accounts are withheld or delayed
• Financial records are incomplete or opaque
• Large expenditures or loans are authorised without consultation
• Directors receive disproportionately high salaries or benefits
  

The sense that company finances are being misused or hidden is a significant trigger for legal complaints.

3. Unequal Treatment and Exclusion

Shareholders may feel marginalised, particularly in cases where the board is controlled by a few majority shareholders. Typical examples include:

• Exclusion from management decisions or board meetings
• Being denied access to important documents or operational information
• Being overlooked in dividend distributions or share offers
• Removal from office or sidelining without consultation

Such exclusion can form the basis of both legal claims and irreparable damage to working relationships.

4. Disputes Over Business Direction or Strategy

Not all disputes are about wrongdoing. Shareholders and directors may simply disagree on fundamental issues such as:

• Expansion versus consolidation
• Investment in new technology or product lines
• Pursuit of riskier growth strategies
• Whether to seek a sale or external investment
  

When these strategic disagreements become entrenched, they can paralyse the business.

5. Dividend Policy Disputes

Where shareholders rely on dividends for income, tensions can quickly arise if profits are retained or disproportionately allocated. This is especially common when directors (who are often shareholders themselves) choose to pay themselves high salaries and bonuses while declaring little or no dividend for others.

6. Competing Business Interests

Directors who have other business interests — particularly in the same sector — risk creating direct competition with the company. This may breach their duty to avoid conflicts of interest and can lead to claims if:

• They divert business opportunities for personal gain
• They use company resources or contacts for other ventures
• There is a lack of disclosure about their competing involvement
  

Even where there is no actual damage, the perceived conflict can destroy trust.

7. Breach of Articles or Shareholders’ Agreement

If directors or shareholders act outside the terms of the company’s articles of association or shareholders’ agreement, the other parties may have a contractual claim. Common breaches include:

• Issuing shares without proper authority
• Transferring shares in breach of pre-emption rights
• Appointing or removing directors without following correct procedures

Such breaches can cause confusion, delays, and legal uncertainty about who has authority and ownership rights.

Your Legal Options

The nature of your role in the company—whether you are a shareholder, a director, or both—will determine which legal remedies may be available to you. It is also vital to assess your shareholding percentage, as this can affect the legal thresholds for bringing certain actions.

Potential Claims Include

There are a number of legal avenues available to shareholders and, in some cases, directors. These remedies vary in complexity, cost, and potential outcomes, so choosing the right approach is vital.

1. Unfair Prejudice Petition – Section 994 Companies Act 2006

This is the most common remedy for minority shareholders who feel they have been unfairly treated. To succeed, you must show that:

• The conduct of the company’s affairs has been unfairly prejudicial to your interests as a shareholder
• The behaviour complained of is ongoing or recent enough to justify court intervention
  

Common examples of unfair prejudice include:

• Exclusion from management or decision-making without justification
• Withholding financial information or access to company records
• Misappropriation of company funds by majority shareholders
• Unequal distribution of profits or dilution of minority shareholding

If successful, the court can order the majority to buy out your shares at a fair value, among other remedies.

2. Derivative Claims – Sections 260–263 Companies Act 2006

Derivative claims allow a shareholder to bring a legal action on behalf of the company against a director (or directors) who have breached their duties. These are typically used where the wrongdoing harms the company itself, such as:

• Authorising unlawful payments or transfers of assets
• Failing to disclose personal interest in company transactions
• Negligent management causing loss to the company

The court must grant permission for a derivative claim to proceed, which involves an initial hearing to assess the merits of the case. If granted, the court may order damages, injunctions, or require directors to account for profits made.

3. Injunctions and Emergency Relief

In urgent cases where immediate harm is threatened — for example, where assets are at risk of being transferred or key decisions are being made in breach of agreements — the court may grant an injunction to:

• Stop unlawful share transfers or appointments
• Prevent the dissipation of company assets
• Suspend certain decisions until a full hearing can take place

This type of relief can be critical in preserving your position and stopping the damage while a longer-term solution is sought.

4. Just and Equitable Winding Up – Section 122(1)(g) Insolvency Act 1986

This is a more drastic remedy that asks the court to wind up (close down) the company due to irreconcilable differences among its shareholders. It is only granted in exceptional circumstances, such as:

• Total breakdown of mutual trust and cooperation
• Deadlock between shareholders in a quasi-partnership company
• Failure of the company to fulfil its intended commercial purpose

While rare, this remedy can be a powerful fallback when other options have failed or are unavailable.

5. Negotiated Share Buy-Outs

Where relationships have broken down but formal litigation is undesirable, a negotiated exit can be a practical solution. This may involve:

• Valuing the shares of the departing shareholder
• Agreeing a buy-out mechanism and timeline
• Ensuring non-compete and confidentiality protections are included

We can assist in negotiating terms that are fair, binding and enforceable.

6. Claims Under Shareholders’ Agreements or Articles

Many shareholder disputes can be resolved by enforcing the contractual terms already in place. We help clients:

• Enforce or defend against pre-emption rights, drag-along or tag-along clauses
  
• Clarify provisions around board composition and quorum
• Challenge decisions made in breach of the agreed corporate governance framework

Contractual claims are often quicker and less confrontational than statutory remedies and can bring clarity to ambiguous situations.

Challenges for Minority Shareholders

Minority shareholders often face the greatest difficulties in enforcing their rights, especially where the majority control the board and resources of the company. They may feel isolated, under-informed, and powerless. At The Jonathan Lea Network, we specialise in empowering minority shareholders by helping them understand their rights, gathering evidence, and exploring the most appropriate legal routes to assert their interests.

We can help minority shareholders:

• Assess the strength of their claim and potential remedies
• Understand the procedural and evidential requirements of each route
• Negotiate buy-outs or settlements with majority shareholders
• Prevent further harm to the company through pre-emptive legal measures
  

Tailored Support for Directors

Directors who are subject to a shareholder challenge need proactive legal support to defend their actions, clarify their decisions, and maintain control of the business. We assist directors in responding to allegations, upholding their duties, and mitigating disruption.

Our support includes:

• Reviewing decisions and conduct in light of directors’ duties
• Preparing defences to derivative or unfair prejudice claims
• Resolving internal tensions to restore stability
• Advising on restructuring, settlement and governance improvements

Why Early Legal Advice Matters

Disputes between directors and shareholders can escalate quickly and become deeply personal. Left unchecked, they can cause financial loss, reputational damage, and long-term instability. Getting legal advice early means:

• Identifying the key legal issues before positions become entrenched
• Exploring commercial solutions that preserve business continuity
• Minimising costs by avoiding unnecessary litigation
• Protecting your rights before critical decisions are made without you

Why Choose The Jonathan Lea Network?

We are a Sussex-based specialist law firm that serves clients throughout the UK. Our team offers a unique combination of City-level expertise and SME-focused service. Here’s what sets us apart:

• Clear, Strategic Advice: We combine legal precision with commercial realism to find the right solution for your situation.
• Practical, Cost-Effective Support: We understand that SMEs need clarity on fees. We offer transparent pricing and fixed-fee options where possible.
• Client-Focused Service: We listen carefully, explain your options in plain English, and prioritise your objectives.
• Depth of Experience: We have acted on numerous director/shareholder disputes involving everything from family businesses to high-growth startups.
• Proactive Approach: We aim to resolve disputes swiftly and constructively so you can get back to running your business.

Our Process

We begin with a free 20-minute discovery call, where we will:

1. Understand your situation and objectives
2. Identify any urgent steps that need to be taken
3. Explain your legal options and suggest next steps
4. Provide an indication of costs and timelines

Should you choose to proceed, we can then carry out a more detailed review of the company documents, communications, and relevant events to assess your position thoroughly.

Shareholder and Director Disputes FAQs

Speak to Our Experts Today

Disputes between directors and shareholders can be stressful and disruptive, but they don’t need to threaten your business or your investment. At The Jonathan Lea Network, we are here to protect your interests, assert your rights, and work with you to reach the best possible resolution.

Contact us today for a no-obligation 20-minute introductory call.

Let us help you turn the situation around with expert, empathetic legal advice that delivers real value.

📞 Call us on +44 1444 708 640
📩 Or email us at wewillhelp@jonathanlea.net