Quite regularly, a company will end up in a situation where directors no longer see eye to eye and reach a level of “deadlock”.
And unfortunately, with lots of companies not having shareholders agreements, it can be difficult to know where to go from there.
Generally speaking, if there’s a deadlock and no shareholders agreement, the best outcome is usually a negotiated settlement which avoids expensive litigation.
Both of the parties can be encouraged by the Solicitors to make a hard and positive effort to come up with pragmatic solutions, perhaps with the help of a mediator through Alternative Dispute Resolution, to avoid ending up in court.
If a settlement cannot be reached there are several options, including winding-up, a buyout by one side or the other, or a solvent liquidation.
Who can help you reach a settlement?
Well firstly, a solicitor…
In my opinion, it’s vital you instruct a solicitor to assist you negotiate a settlement – you need to understand your legal entitlements and alternatives, so you can negotiate from a position of strength.
Also, there are various ways a party’s minority or majority shareholding can be valued and it’s vital to know what your shares are worth before you commence any negotiations.
And secondly, a mediator…
As stated above, employing the services of a mediator is a good alternative to all-out war.
Mediation is a process where a trained mediator, as a third party, tries to knock the parties’ heads together (and sometimes knocks their Solicitors’ head together as well!) to explore a mutual resolution to the dispute.
We can arrange a mediation with a skilled mediator in this area at very short notice, so if you are ever in need, please get in touch.
Mediation often ends up with binding legal agreements, and in our experience, if both parties are competently advised, and know their real weaknesses and strengths, mediation is often successful.
What if all negotiation fails and mediation fares no better?
You’re then in the realm of litigation:
Your litigation options include:
- Claim or injunction for a breach of another Director’s statutory duties;
- A derivative action by minority shareholder (see blog post 3 weeks ago);
- An unfair prejudice petition (we will deal with this in more detail next week!).
The court has significant discretions in making decisions in all of these areas and it is vital to take competent advice from Solicitors who understand how judges approach these matters before starting.