International Shareholder Dispute Solicitors in London

Shareholder disputes can become considerably more difficult when owners, directors, companies and valuable business interests are spread across different countries.

The legal structure may involve several companies, while commercially the owners have always regarded the business as one international enterprise.

Nath Solicitors is a boutique London law firm advising shareholders, founders, directors, investors and international businesses on disputes concerning ownership, minority shareholder rights, company control, shareholder exits and the future of internationally operated businesses.

To discuss an international shareholder dispute confidentially, call 020 3983 8278 or complete our online contact form.

We act in disputes involving businesses connected with the UK, Europe, the Middle East, the United States and other jurisdictions. Where foreign-law advice is required, we work with overseas lawyers so that the shareholder strategy reflects the wider international business structure.

This page focuses on the substantive shareholder relationship within an international business: ownership, minority rights, company control, deadlock, exits and the division of international business interests. For detailed guidance on jurisdiction, governing law, proceedings in several countries, overseas service and foreign enforcement, see our Cross-Border Shareholder Dispute Solicitors page.

What is an international shareholder dispute?

An international shareholder dispute is a disagreement about the ownership, management, control or value of a business that operates across more than one country.

The international element may arise because:

• shareholders live in different countries;
• the business operates through companies incorporated in several jurisdictions;
• the group owns overseas subsidiaries;
• valuable intellectual property or brands are used internationally;
• different shareholders control different geographical markets;
• investment into the business came from overseas;
• a shareholder exit needs to deal with interests in several countries; or
• important business assets or operations are located outside the UK.

The underlying disagreement may still involve familiar shareholder issues.

A minority investor may feel excluded. Two founders may no longer agree about strategy. One shareholder may want to leave. Another may control part of the group or an important overseas business.

What makes the dispute international is that the commercial relationship is spread across several companies, markets, assets or jurisdictions.

The solution therefore needs to take account of how the international business actually operates rather than looking at one shareholding in isolation.

Our main Shareholder Dispute Solicitors page covers the wider framework for shareholder disputes.

Understanding the international company structure

One of the first questions is often deceptively simple:

Which company does the shareholder actually own shares in?

An international business may commercially operate as one enterprise while legally consisting of several separate companies.

The structure might include:

• a UK holding company;
• overseas operating subsidiaries;
• intellectual property holding companies;
• local trading companies;
• joint ventures; and
• intermediate companies through which other entities are owned.

A shareholder may own shares in the parent company without holding a direct interest in every subsidiary.

Owning part of an international group commercially does not necessarily mean owning shares directly in every company within that group. Each company remains a separate legal entity, and the shareholder’s formal rights depend on where their actual shareholding sits.

That can become critical where the dispute concerns an asset, revenue stream or subsidiary controlled by another part of the group.

For example, a shareholder might own 50% of a holding company while the group’s valuable trade mark is owned by a subsidiary. A dispute over control of the business and a dispute over ownership of that trade mark are not necessarily the same legal question.

Mapping the group can therefore be fundamental before deciding what rights need to be protected.

Who controls the international business?

Percentage ownership is important, but it does not always tell the whole story.

Practical control of an international group can depend on:

• voting rights in the parent company;
• board appointment rights;
• reserved matters;
• who controls particular subsidiaries;
• local management arrangements;
• rights under shareholders’ agreements;
• control of important contracts;
• access to banking or financial information; and
• ownership or control of essential intellectual property.

One shareholder may own half of the parent company but exercise little direct authority over an overseas subsidiary managed by the other shareholder.

Another may have contractual rights requiring their consent before the group can borrow money, dispose of important assets or enter a new market.

The legal structure and the practical reality therefore need to be considered together.

A dispute about “control of the business” may involve several different rights rather than one decisive voting percentage.

International shareholder agreements and governance

Shareholders in an international business may have agreed governance arrangements that go beyond ordinary voting rights.

A shareholders’ agreement may:

• reserve major decisions for unanimous consent;
• give particular investors board-appointment rights;
• require specified financial information to be provided;
• restrict transfers of shares;
• control borrowing or capital expenditure;
• regulate acquisitions or disposals;
• allocate responsibility for different territories; or
• require consent before important assets are transferred.

These rights can become particularly important after relations deteriorate.

In an international group, it is also necessary to establish whether the agreed governance rights apply only to the parent company or extend to decisions involving subsidiaries and overseas operations.

A shareholder may, for example, have a contractual right to approve disposal of a substantial group asset even though that asset is legally owned by a subsidiary.

The wording of the agreement and the underlying corporate structure both matter.

Which law applies to an international shareholder dispute?

Different parts of an international shareholder dispute may be governed by different laws.

The law applying to the company itself may differ from the law governing a shareholders’ agreement or a contract through which shares were acquired.

This can matter where an international business uses companies incorporated in several countries or where contractual arrangements were negotiated separately from the corporate structure.

This page concentrates on the substantive shareholder dispute. Where the applicable law, jurisdiction or appropriate forum is itself contested, see our Cross-Border Shareholder Dispute Solicitors page.

Minority shareholders in international businesses

A minority shareholder can become particularly vulnerable where the majority shareholder controls management from another country.

Distance can make it harder to understand how the company is being operated or what is happening elsewhere in the group.

Concerns may include:

• exclusion from management;
• refusal or failure to provide financial information;
• unexplained transactions;
• non-payment of dividends;
• movement of assets between group companies;
• diversion of revenue;
• restructuring of the international group;
• issue of new shares or dilution;
• disposal of valuable business assets; or
• pressure to sell an interest at an undervalue.

International structures can make some of these issues harder to identify.

A shareholder may see declining value at parent-company level without immediately knowing whether revenue, IP or business opportunities have been moved elsewhere in the group.

The first task is often to identify what happened and which company was affected.

Where the relevant company falls within the English Companies Act 2006 regime, section 994 may provide a remedy where its affairs have been conducted in a manner unfairly prejudicial to a member’s interests. A company incorporated overseas may instead be subject to the shareholder remedies available under its own law.

For detailed guidance on English unfair prejudice claims, see our Unfair Prejudice Petition Solicitors page.

For the additional questions that arise where the relevant company is incorporated overseas, see our Cross-Border Shareholder Dispute Solicitors page.

International shareholder deadlock

International businesses can become particularly difficult to manage when equal shareholders fall out.

The problem may extend beyond ordinary disagreement at board or shareholder level.

One shareholder might control the UK business while another has developed the company’s operations in the Middle East or United States.

One may hold key customer relationships in one market while another controls a foreign subsidiary.

Both may rely on the same brand, intellectual property, supply chain or technology.

That can make separation considerably more complicated.

Questions might include:

• which shareholder should retain particular subsidiaries;
• whether geographical markets can be divided;
• how shared intellectual property will be used after separation;
• whether one party can continue using the existing brand;
• what happens to customers operating across several countries;
• how intercompany balances will be treated; and
• whether either side can operate independently after the split.

A deadlock provision in the shareholders’ agreement should also be reviewed where one exists.

Where the central issue is a 50/50 impasse, shareholder buyout or detailed business separation, see our Shareholder Deadlock and Business Separation page.

Shareholder exits from international businesses

A shareholder exit can be more complicated where the economic value of the business is spread across several companies and countries.

A buyout may need to address:

• shares in the parent company;
• overseas subsidiaries;
• shareholder and intercompany loans;
• international intellectual property;
• brand rights;
• foreign-currency payments;
• personal guarantees;
• territorial arrangements;
• confidential information;
• local management interests; and
• future competition.

A buyout cannot always be valued by looking at the parent-company accounts in isolation. The economic value may depend on overseas subsidiaries, licensing arrangements, intercompany balances and intellectual property held elsewhere in the group.

Independent valuation evidence may therefore be required.

The transaction itself may also need input from accountants, tax advisers and overseas lawyers before the proposed structure can be implemented.

In some cases, one shareholder buys the other’s interest in the entire group.

In others, a better solution may be to divide the international business so that each shareholder continues with different companies, markets or assets.

The commercial objective should be clear before the legal structure of the exit is designed.

Dividing an international business

Some disputes reach the point where continued ownership together is no longer realistic, but neither shareholder wants simply to walk away.

The international structure can sometimes make a commercial division possible.

For example, the parties might agree that:

• one shareholder takes control of one geographical market;
• different subsidiaries pass to different owners;
• one shareholder retains a particular trading division;
• intellectual property is transferred or licensed;
• certain customers or distribution rights are allocated between the parties; or
• part of the business is sold while other operations continue.

A separation needs to work after completion, not simply end the immediate legal dispute.

Contracts, employees, financing, tax, guarantees, licences and ownership of core assets may all need to be considered.

This is particularly important where both parties intend to continue competing in related markets.

International disputes over intellectual property and brands

Intellectual property can represent a substantial part of the value of an international business.

A company may trade under one brand across several countries while the relevant trade marks, software or other rights are held by a specific company within the group.

A shareholder dispute can expose disagreements about:

• which company owns the intellectual property;
• who funded its development;
• whether rights were properly assigned;
• control of overseas trade mark registrations;
• licensing arrangements within the group;
• use of the brand in particular territories; or
• movement of IP into another company.

Ownership of shares and ownership of intellectual property are not automatically the same thing.

A shareholder may have an economic interest in the group without personally owning the brand or trade marks used by the business.

Conversely, control of valuable IP can give one part of an international group considerable commercial importance even where the underlying shareholding appears straightforward.

Our Intellectual Property Dispute Lawyers page covers standalone IP disputes in greater detail.

When international shareholders are also directors

Shareholders in privately owned international businesses often serve as directors too.

That means a disagreement about ownership or control can develop into allegations about the management of particular companies.

The important question may be which company suffered the alleged wrong.

A director may sit on the board of an English parent company while another shareholder controls an overseas subsidiary. Conduct affecting one company does not automatically produce the same rights or remedies in another group entity.

For an English company, directors’ general statutory duties are ordinarily owed to the company.

Where the dispute concerns directors’ duties, conflicts, misuse of company assets or derivative claims under English law, see our Director Dispute Solicitors page.

What if the dispute is about whether someone owns shares at all?

Some international disputes begin with a more fundamental question.

A founder may say that they were promised equity but never formally registered as a shareholder.

An investor may claim a beneficial interest in shares held in another person’s name.

The underlying records, payments and communications may be located in several countries, but the core issue remains one of ownership or entitlement.

Our Business Ownership & Share Entitlement Dispute Solicitors page covers disputes concerning registered ownership, beneficial interests, oral agreements and promised equity.

Where the international legal structure itself creates additional questions about applicable law or jurisdiction, our Cross-Border Shareholder page should also be considered.

Resolving an international shareholder dispute

Not every international shareholder dispute needs to be determined through a final court judgment.

A commercial settlement can sometimes produce a much more workable outcome.

Depending on the business, the parties might agree:

• a shareholder buyout;
• staged payments;
• sale of the whole group;
• transfer of particular subsidiaries;
• division of territories;
• transfer or licensing of intellectual property;
• revised governance arrangements; or
• separation of international operations.

Mediation can be particularly useful where several connected commercial issues need to be resolved together.

The parties are not limited to asking a court to decide who was right about the original disagreement. They may be able to redesign their future relationship entirely.

Where a shareholders’ agreement requires arbitration, that mechanism will also need to be considered.

For detailed information about international ADR, see our International Arbitration and Mediation page.

Working with overseas lawyers

An international shareholder dispute may require specialist advice in more than one country.

Nath Solicitors can work with overseas counsel where local company law, transactions or other foreign-law issues require advice.

This allows the English shareholder strategy to be considered alongside what needs to happen elsewhere in the international group.

Where the dispute is focused primarily on jurisdiction, proceedings abroad, service or international enforcement, see our Cross-Border Shareholder Dispute Solicitors page.

Our experience in international shareholder disputes

Nath Solicitors has more than 30 years of litigation and advisory experience and acts for shareholders, founders, investors and businesses involved in substantial international disputes.

Our published experience includes advising on a shareholder dispute concerning ownership and control of valuable intellectual property rights, trade marks and commercial assets across the Middle East, Europe and the United States.

The dispute involved competing shareholder and trade mark claims within an international business.

An important issue was the relationship between control of the wider enterprise and ownership of the valuable intellectual property and commercial assets on which it depended.

Nath Solicitors worked with overseas lawyers in connection with proceedings in several jurisdictions and reports that the court action concluded in its client’s favour.

The matter illustrates why international shareholder disputes cannot always be understood simply by looking at percentage ownership in one company.

Control of the group and ownership of its most valuable assets are not necessarily located in the same place.

This page contains general information about company law and international shareholder disputes. It does not constitute legal advice in relation to any particular matter.

Reviewed by Shubha Nath, Solicitor and Director