What happens if I fall out with my shareholders?

Nobody goes into business expecting things to go wrong, but unfortunately, there are a number of reasons shareholders will fall out with one another – and even the smallest disputes can pose big problems to the wider business.

Maybe one shareholder feels that their interests are being unfairly prejudiced by the conduct of others. Perhaps another has simply had a change of heart about the business, or wishes to sell their shareholding.

Whatever the scenario, shareholder disputes can prove very damaging to a business if they are not handled effectively. This is particularly true in instances where the shareholders and directors of a company are one and the same.

If a company’s shareholders and directors are caught in a deadlock, an accountant can step in and act as a general adviser in order to minimise any collateral damage to the businesses that the dispute may otherwise cause.

When it comes to shareholders disputes, directors will often feel inclined to side with the majority shareholders. However, in the longer-term, this may not always be the best solution for the business – which is why the wider situation needs to be carefully assessed by an expert.

By seeking specialist advice from the outset, directors can seek to minimise the chance of shareholder disputes arising and escalating.

This can be achieved if the directors meet at the earliest possible stage in order to draft up a written Shareholders’ Agreement.

These important documents can ‘set in stone’ numerous practical rules for the company and its shareholders to abide by, ensuring that everyone knows where they stand and providing the answers to many of the stressful questions which might arise should shareholders fall out with one another at a later date.

A Shareholders’ Agreement can include details of shares, share prices and restrictions on selling, who holds the most power in a company, what happens if a shareholder leaves and who they can transfer shares to – or even exactly how a dispute will be resolved if one arises.

For expert accountancy advice or more information in relation to Shareholders’ Agreements, please get in touch with the expert team at JW Hinks.