A shareholder is any person, company, or institution that owns shares known as equity, in a company’s stock.
- A company shareholder is a person who has as little as a single share.
- A single shareholder who owns more than 50% of a company’s shares is a majority shareholder. While those who own less than 50% of a company’s stock are classified as minority shareholders
- Frequently majority shareholders are company founders. These majority shareholders wield considerable power to influence critical operational decisions, including replacing board members, executives, and senior personnel.
- Shareholders enjoy voting rights at shareholder meetings to approve the members of the board of directors, dividend distributions, or mergers.
- Shareholders partake of capital gains or losses as per the company’s performance.
- In the case of bankruptcy, shareholders can lose their entire investment.
- Personal assets of shareholders are never at risk even when a company becomes bankrupt.
Shareholder disputes in the UK primarily arise when businesses have long-standing, unresolved issues which culminate into disputes or a series of disputes. The key questions remain the same for all companies- Is there a shareholders’ agreement in place?
However, there are instances wherein no shareholders’ agreement has been established; or the dispute cannot be resolved with reference to the agreement. This leaves no options for the shareholders except to fall back on legal recourse. Generally, shareholder disputes fall into two broad categories –
- Minority shareholders, together, block the majority shareholder from a specific course of action.
- Majority equity holders pressurise the minority shareholders into accepting decisions upon which they do not agree.
Whether a shareholder is a majority or minority shareholder, it is critical to understand the options available to both types of shareholders in terms of decision making and their implementation. Successful resolution of shareholder disputes in the UK requires versatility and an understanding of the dynamics driving them. Finding a resolution to a dispute requires a degree of resourcefulness which must reflect the nature of the business. As a part of this, it is imperative to have a clear understanding of the root of the dispute and the end goal as envisaged by all the stakeholders.
We at Alfred James & Co Solicitors LLP have years of experience acting on behalf of minority shareholders. Our experienced solicitors can provide immediate, tough, and proactive guidance to shareholders whose interests have been impacted negatively or have been affected by the conduct of the group of other shareholders.
