Disputes between shareholders, or between shareholders and directors, are among the most damaging problems a company can face — they can paralyse decision-making and destroy value. The Companies Act, 2017 provides a framework for resolving them, and understanding it early helps parties avoid the worst outcomes.
A frequent issue is the oppression of minority shareholders or conduct prejudicial to the company's interests. The Act allows affected members to approach the relevant forum for relief, which can include regulating the company's affairs, restraining particular actions, or ordering the purchase of one party's shares to break a deadlock.
Director-level disputes raise their own questions — the validity of board meetings and resolutions, the proper procedure for appointing or removing directors, and breaches of directors' duties of care and good faith. Because directors owe duties to the company itself, an aggrieved party must be careful to frame the claim correctly.
Many of these conflicts are made worse by poor documentation: missing minutes, unsigned share transfers, or a shareholders' agreement that was never put in place. A well-drafted shareholders' agreement, with clear exit and deadlock mechanisms, prevents a large share of disputes before they start.
TFMC advises companies, majority owners and minority shareholders on both preventing and resolving these disputes — through negotiation where possible, and through the proper legal forum where necessary.