Wednesday, 23 August 2017

Minority shares are just as valuable

Minority shareholders should not be bullied by fellow directors when it comes to board room disputes, a Telford solicitor has warned.

Graham Davies, from Martin-Kaye Solicitors in Euston Way, said directors’ disputes could be extremely stressful, but minority shareholders had every right to be protected just as much as other directors.

“Company law gives greater rights to majority shareholders, which on the face of it puts minority shareholders at a disadvantage if a dispute occurs. This could lead to their wishes being ignored, and even to them losing their seat on the board, which would devalue their shares even further.”

But Mr Davies said if the majority of the board’s actions were seen by the courts to be unreasonable, the minority shareholder may be able to claim “unfair prejudice”.

“If the person at the centre of the dispute feels the other shareholders have been persecuting them, they can ask the courts to force the majority to buy them out at a higher than normal share price. The court could even order that the entire company should be wound up if it’s the only way the shareholder can get their money.”

Mr Davies said to protect their position, it was important for majority shareholders to show they had not acted unfairly and that they had not prejudiced the minority stake owner’s position.

“Keep strict and thorough records of any serious director-shareholder disputes, and don’t act hastily, no matter how you may really feel about the awkwardness of your position. Try to work with all your fellow directors – despite how difficult the situation may be – to either resolve the problem or find a way for the minority shareholder to leave on the best possible terms.

“Rather than punishing the minority shareholder to force their hand and get them to leave, it’s far better to negotiate a settlement or you could face a very expensive court case just to regain the shares in your own business.”

Mr Davies said disputes involving minority shareholders often occurred as a direct result of a family fall-out, and even if there was a clear shareholders’ agreement in place, problems could still arise.

“In private companies where management and decision making is shared on a one person one vote basis, even if you own different proportions of the company, then think very carefully about your actions before a minor disagreement escalates into something much larger.”