I’m being treated unfairly as a shareholder, what can I do?

As a shareholder you have protection under the law especially under s994 of the Companies Act 2006. This says that you are entitled to present a petition to the Court if you are being prejudiced or harmed by other members in the company and it is unfair. The Court has wide powers to help you which include making an order to:-

  • regulate the conduct of the company’s affairs in the future;
  • require the company to stop an act you have complained of and/or do an act that you have said it has omitted to do;
  • authorise the company to pursue civil proceedings;
  • prohibit the company changing its articles; or
  • provide that the company or any other shareholder purchases your shares.

Examples of shareholders being unfairly prejudiced include:-

  • business is being moved away from the Company or the assets of the Company being used for the personal use of the directors;
  • directors paying themselves bonusses whilst refusing to pay dividends to shareholders;
  • excluded from management;
  • not following any shareholder agreement or Articles of Association;
  • repeatedly failing to hold AGMs;
  • generation of shares which dilute yours; or
  • withholding company documents such as accounts

Of course, there are alternatives to presenting a petition, the main one being reaching settlement with the other shareholders, but other potential remedies could be available as an alternative or alongside a petition, depending upon your circumstances. These include petitioning for the “just and equitable winding-up” under s.122(1)(g) of the insolvency act 1986 (this is well suited to where there is a 50/50 deadlock between shareholders that cannot agree the management of the company) and/or a derivative action under sections 260-264 of Companies Act 2006 (which is where a claim is brought by a shareholder on behalf of the Company when a director is in breach of his duties to the company).

This is complex area of law and good advice at an early stage will be invaluable. Before instructing solicitors you should try wherever possible to obtain a valuation of your shares or at least get a firm idea as to their value. The main remedy if you present a petition is usually the sale of your shares so you need to be sure that they are of such value to mean that litigation is worthwhile. Be careful confiding in the Company’s accountant. Whilst they are under a duty to the Company they may well be friendly with the other shareholders so could be reporting to them what you say or ask for.

One of the first questions your solicitor will have for you is to provide copy documents including any shareholders agreement, share certificates and the Articles of Association – have those ready together with a full account of what has happened, ideally in writing.