What happens if you don’t have a carefully prepared shareholders agreement; shareholder disputes

Case Study 1

We were instructed by one of the two joint shareholders in a company to resolve a shareholders dispute.  The company had been set up by two friends to produce and market food products. There was no shareholder agreement in place although it was accepted that each party held 50% of the shares.

We reviewed the matter and the shareholding and advise our client as to the best way to proceed.

Our client made an offer to take over outstanding loans of the company and to repay the other shareholder a further loan she had made to the company from the distributable profits of the company over the next few years. In return the other shareholder was to enter into a share transfer agreement and sign a stock transfer form for transfer of her shares to our client. The offer made was generous but a failure by the other party to appreciate it meant the offer was not taken up. We then advised our client how to move forward in the face of a difficult situation.

We presented our client with various options as to how he could proceed and ultimately these were beneficial to our client allowing him to be resolve the issues and the dispute that had arisen within the company and to move forward with the business.

Case Study 2

We were instructed by a professional who had set up her company with another professional. Both were joint shareholders. No shareholders agreement was entered into between the parties. For approximately two years the business went well and both parties were happy.

However, when our client decided to dedicate her full time to the business and wanted to exercise more management and financial control the other shareholder became unhappy. Our client realised that the business she was qualified to run and which she had set up was no longer in her control.

We advised our client as to the best way to proceed to resolve the shareholders dispute. We even advised our client that due to the tense situation she could expect a director’s resignation from her co shareholder. A few days letter the resignation arrived; our client was not at all surprised by the resignation because she said we had “prepared her well to expect it”.

We advised our client so that ultimately the matter was resolved to our client’s great satisfaction.