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Bad news for minority shareholders in shareholder disputes

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Recently, there has been bad news for minority shareholders in shareholder disputes.

Partnership and Boardroom disputes concerning directors’ and shareholders’ rights are a core part of NDP’s practice. One particular area of interest is when minority shareholders are in dispute with the company, because recent judgements have all supported companies seeking to resist interventionist shareholders trying to gain advantage in their disputes with the business.

A quick look at one of these judgments demonstrates this point.

In Charterhouse v Bonnyman (http://www.bailii.org/ew/cases/EWHC/Ch/2014/1410.html), the directors and all but one shareholder accepted an offer to buy the company, which included a ‘drag-along’ provision requiring this shareholder to sell his (minority) shares at  the same price, who brought a claim for ‘unfair prejudice’ against him for being forced by the majority to sell his shares in this way.

The key contentious issue in this dispute was whether the power of the directors and the majority of shareholders to amend the articles by special resolution had been exercised equitably and for the benefit of the company as a whole.

Ultimately, the court ruled in favour of the company, noting that:

  • Offers to buy shares in a company can be made dependent on a change of articles to introduce a drag-along provision.
  • Drag-along provisions can be used to prevent the sale and purchase being disrupted by a ‘ransom shareholder.

NDP offers guidance and advice to help avoid shareholder and director disputes

Our shareholder disputes team is one of the few teams to comprise lawyers whose main day to day occupation is acting on shareholder and director disputes. The area is one of genuine specialism with a huge amount of detail that can be missed or overlooked without the necessary experience.

Over the years, the team has acted for many shareholders across a diverse range of industries and professions. It has recovered many millions of pounds for directors and shareholders who find themselves in conflict and in need of guidance. Click here for testimonials in this area.

If you need advice on a shareholder dispute, please contact us for your FREE initial consultation.

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