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Shareholder disputes in family businesses

24 July 2018

Shareholders of a business can fall out for a number of reasons, ranging from general disagreements over the governance of the business through to breaches of fiduciary duty. If the business is family-run, however, the personal nature of the relationships can give rise to different implications.

If you are keen to prevent things from turning sour in your family-run business, you would be well-advised to seek legal advice from the get-go and continually throughout the stages of the business’ development.

It’s vital to be prepared and plan ahead; take advice on succession planning and put clear agreements in place to remove any uncertainty in the event of a dispute.

If you haven’t taken such steps during the formation of your business, it’s never too late to get the necessary legal infrastructure in place. A shareholders’ agreement is key, whether you are a small company with two, or a larger business with multiple shareholders. This bespoke agreement gives clarity and protection to a business’ directors and shareholders, enabling them to focus on the day-to-day running of the business.

Shareholder disputes don’t necessarily need to be resolved in the courts. In fact, litigation should be thought of as a last resort; it is an expensive and time consuming exercise which can be very damaging to a company, and perhaps more importantly the family relationships involved.

Naturally, litigation can’t be avoided in every case, but as a first step, it is advisable to seek out an accredited mediator (they are trained to help resolve even very complex and heated disputes), try a round table meeting, or consult an intermediary adviser.

Nick is an associate, solicitor in our litigation and dispute resolution team and handles a wide variety of work for both commercial and private clients. This includes contractual disputes, landlord and tenant matters, property disputes and professional negligence claims. He is an accredited civil and commercial mediator.

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Nick Southwell LLB (Hons)
Associate, solicitor
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