An issue we are seeing more frequently is minority shareholders views’ being disregarded by the majority shareholder. This typically occurs when there are no shareholder agreements and the majority shareholder believes it is their way or the highway. Often the majority shareholder established the company and held the view that it was ‘theirs’.
A common misconception is that minority shareholders have no meaningful options in this situation.
In this article, we explain the rights and protections minority shareholders have under the Companies Act and how we deal with majority shareholders when these disputes arise.
Shareholder disputes arise for various reasons but are fundamentally rooted in disagreements between shareholders of a company, often between the majority and minority stakeholders. The crux of the problem lies in the control and decision-making powers within the company. Majority shareholders, who might also serve as the company’s directors, tend to leverage their position to influence the company’s direction, sometimes at the expense of minority interests.
Minority shareholders, holding less control, face significant challenges:
Despite these adversities, minority shareholders must recognise their legal rights and the avenues available for redress.
There are protections available under the Companies Act, which offer hope for prejudiced minority shareholders:
Norling Law advocates for an educational approach towards resolving shareholder disputes. By informing majority shareholders of minority rights, they promote a more equitable negotiation process. This strategy not only aims to achieve fair settlements without litigation but also fosters a cooperative environment for future company operations.
Shareholder disputes are an area fraught with challenges, but navigable with the right knowledge and strategies. Understanding one’s rights, seeking legal advice, and approaching disputes with a balanced perspective can empower minority shareholders to protect their interests and contribute positively to the company’s future.
Navigating shareholder disputes requires nuanced understanding and strategic planning. Legal consultation offers tailored advice to ensure that minority shareholders can assert their rights effectively.
At Norling Law, we offer a FREE 30-minute shareholder dispute legal consultation. Get in touch if you need help.
Brent is the Director of Norling Law. He has a wealth of experience in the District Court, High Court, Court of Appeal and Supreme Court. Brent is passionate about negotiating favourable outcomes for his clients and able to implement this in his daily negotiations.
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