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Shareholder disputes can be disruptive, costly and damaging to a company’s long-term success. These conflicts often arise when the interests of shareholders begin to diverge. While every business is unique, many shareholders disputes stem from a common set of issues. Understanding the triggers can help business owners to take proactive steps to minimise risk.
Here are the top 10 causes of shareholder disputes:
1. Breach of Shareholder Agreements
Shareholder agreements often outline the rights, obligations and expectations of each shareholder. When one party breaches the terms, whether by selling shares without consent, failing to fulfill duties or violating voting arrangements, usually leading to significant tension and legal challenges.
2. Unequal distribution of profits or dividends
Disagreements often arise when shareholders feel that profits are not being distributed fairly, especially when majority of shareholders control dividend policies. Minority shareholders may claim oppression if they believe profits are being withheld for personal gain or to devalue their shares. Also, some disagreements may arise in relation to the allocation of profits, dividends or the retention of earnings, this causes issues mainly for the shareholders that have financial needs which arise a lot in family businesses.
3. Mismanagement or allegations of misconduct
If shareholders believe that company directors or managers are mismanaging the business, whether it is through poor financial decisions, nepotism or unethical behaviour, then conflict is likely to follow. This becomes particularly contentious if management fails to provide transparency or timely updates.
4. Lack of communication and transparency
Open communication is vital for shareholder trust. A lack of transparency around financials, strategy or decision making can create suspicion and lead to disputes. Often, the absence of clear reporting structures is the root cause of these problems.
5. Disagreements on business vision, direction or strategy
Shareholders may have different visions for the future of the company. Some may priorotise rapid growth and expansion, while others may advocate for conservative and more stable development.
6. Exit strategy conflicts
Many shareholder disputes emerge when one party exits the business and there is no clear mechanism in place to facilitate a fair buyout. Disagreements over valuation, timing or who can purchase the departing shareholder’s stake can easily lead to litigation.
7. Minority shareholder oppression
In closely held companies, minority shareholders may feel excluded from key decisions or denied access to important information. This can result in claims of unfair treatment, especially if minority shareholders act in their own interests without regard to others.
8. Deadlock between equal shareholders
When ownership is split equally, deadlocks can arise during key decisions, especially when there is no mechanism for resolution via votes. Without a resolution process, these deadlocks can strain personal relationships.
9. Changes in shareholder circumstances
Life events such as bankruptcy, divorce or death can suddenly shift the balance of shareholder power. If these transitions are not accounted for in the shareholder agreement or succession planning, then they could lead to disputes among remaining shareholders.
10. Dilution of ownership
Disputes often occur when new shares are issues, diluting the ownership of existing shareholders. If these decisions are made without full consent or transparency, then they may be perceived as self-serving or as an attempt to weaken minority influence.
Resolving Shareholder Disputes
There are many ways that shareholder disputes can be resolved. In the first instance, the shareholders will most likely engage in conducting a meeting to see whether all parties can come to an agreement, however in other cases third-party assistance may be required to resolve the dispute. Please see below ways that a third party can assist in resolving shareholder disputes:
1. Alternative Dispute resolution including mediation – this method involves a neutral third party helping to come to a mutual agreement.
2. Arbitration – this is a more formal process where a third party makes a binding decision.
3. Litigation – this is where the Court intervention may be required when all other methods have failed to resolve the dispute. This is known to be the last resort due to its costs and time involved.
Shareholder disputes can be complex and emotionally challenging, often involving personal relationships as much as legal and financial matters.
For further advice and assistance please contact our Litigation and Dispute Resolution team on  01604 344562 / 01908 916096 or email info@franklins-sols.co.uk.
When the buyer agrees to purchase share capital from a business, the buyer usually seeks protection therefore it is important for the seller to disclose all relevant information to the buyer. The transaction is often complex, involving a range of legal documents and terms that define the responsibilities and expectations of both the buyer and the seller. One of the most important components includes warranties, this is where the seller makes a promise to the buyer regarding the state of the business that is being sold confirming the representations of the business are true and correct to the best of the seller’s knowledge. These warranties are designed to protect the buyer by ensuring that they are purchasing the business under agreed conditions. However, the seller will be in breach of warranty if they fail to uphold these promises which will most likely lead to legal disputes and potential financial losses. The buyer will then have a contractual claim for breach of warranty against the seller.
What is a warranty?
When purchasing a business, a warranty is known as a statement or a guarantee made by the seller regarding certain facts and conditions related to the business which is usually included within the body of a share purchase agreement. These conditions will usually cover aspects such as the financial health of the business, the accuracy of the financial statements, legal compliance and the absence of liabilities. It is crucial for the seller to provide the buyer with all the warranties as this will provide the buyer with confidence that they are acquiring a business to meet the agreed conditions before proceeding with the purchase. However, if the conditions are not met then it will constitute a breach of warranty. The buyer must carry out ‘due diligence’ on the business by investigating and verifying the business and all other aspects of the business before purchasing the same.
How do I know there is a breach of warranty?
A breach of warranty ordinarily occurs when one of the parties, usually the seller, fails to meet the terms and conditions outlined within the warranty agreement made during the sale. A breach of warranty can happen if the seller promises or represents something specifically about the business which is proved to be misleading, false or incomplete. For example, if the buyer discovers that the seller mislead the buyer by confirming that the business is profitable, there are significant debts or other undisclosed financial issues or if the seller claims the ownership of the patents or trademarks that were owned by other third parties, then this would constitute as a breach.
How can I make a breach of warranty claim?
By serving a notice on the seller, this will provide the seller with an opportunity to remedy the breach. However, if the breach cannot be remedied then the seller must offer to reach an agreement and resolve the dispute. The process of making a claim for a breach of warranty usually follows as below:
- To review the Purchase Agreement – It is important to thoroughly review the purchase agreement which will detail all provisions regarding the warranties as well as remedies available to the buyer in the event of a breach of a warranty. It will most likely also include a procedure for making a warranty claim, time limits and any other exclusions or limitations on liability. Furthermore, the sale agreement should also contain some provisions in relation to dispute resolution, arbitration or litigation.
- Gather all evidence – It is essential to gather all of the evidence to support the claim such as financial records, legal documents and communication records. The more evidence there is the more likely the buyer will be able to prove the breach and the damages suffered as a result of the breach.
- Notify the seller of a breach – The majority of sale agreements will require the buyer to notify the seller of any breach of warranty within a specific time period. This is usually done in writing by outlining the nature of the breach, the facts supporting the claim and any damages or losses the buyer incurred.
- Seek resolution – Once the buyer notifies the seller of the breach, the buyer can then attempt to resolve the matter directly with the seller. This could involve negotiating a settlement such as a reduction in the purchase price or an indemnity payment from the seller. It is often that the seller agrees to offer a compensation to resolve the issue. If the resolution cannot be reached through negotiation, the buyer will be able to escalate the matter involving litigation or arbitration. The court or arbitrator will then evaluate the evidence and determine whether the warranty was breached and what remedy if any the buyer is entitled to.
For further advice and assistance please contact our Litigation and Dispute Resolution team on  01604 344562 / 01908 916096 or email info@franklins-sols.co.uk.
Commercial Litigation refers to the legal process of resolving disputes between businesses and individuals over commercial matters which can be resolved through negotiation with the Solicitors on each side. Commercial litigation should be the last resort where the parties have failed to settle the dispute between themselves.
Franklins Solicitors specialise in a wide range of commercial litigation services to resolve disputes efficiently. With extensive experience across various sectors, we provide expert legal advice in all types of business-related conflicts.
Whether you are a small start-up or a large business, our team is committed to delivering tailored solutions that meet your unique needs.
Our commercial litigation services include:
- Contract Disputes – Resolving breaches, non-performance and misinterpretations of commercial agreements.
- Shareholder & Partner Disputes – Handling conflict between business partners, shareholders and directors.
- Employment Disputes – Addressing issues such as wrongful termination, discrimination and workplace breaches.
- Commercial Debt Recovery – Helping to recover unpaid debts and enforce judgments efficiently.
- Intellectual Property Dispute – Protecting patents, trademarks and copyrights.
- Franchise Disputes – Assisting in conflicts related to franchisor-franchisee relationships.
 We work proactively to resolve disputes through negotiation, mediation and if necessary, litigation. Whether you are facing a complex corporate dispute or a straightforward contract issue, our team is here to help you navigate the legal challenges and protect your business interests. We aim to settle commercial disputes without court; this helps the parties to settle disputes quicker and having less costs involved.
For further advice and assistance please contact our Litigation and Dispute Resolution team on  01604 344562 / 01908 916096 or email info@franklins-sols.co.uk.
When moving houses, the process can be both exciting and stressful having to organise so much in so little time. It is crucial to ensure that the communication is clear with everyone involved including Solicitors, Estate Agents, Developers and removal companies. This guide will help you to understand the final part of the conveyancing process so you can prepare yourself ahead of the moving day and ensure the day runs smoothly and stress-free.
What is a completion day?
Completion day is known as the last and key stage of the conveyancing transaction, taking place on a weekday. This is when the ownership of the property is transferred from the seller/developers to the buyer. On this day, the buyer’s solicitors will pay the balance of the purchase price to the seller/developer’s solicitors. Once the sellers solicitors have received the monies, the seller’s solicitors will confirm safe receipt and will notify the estate agents or developer’s site office for the keys to be released. The buyer will then be able to obtain the keys for the property either from the estate agents, site office or via other arrangements previously agreed allowing the buyers to move into their new home. The solicitors will then complete the final legal documents to ensure that the property is transferred to the buyer who is the new owner of the property.
Checklist of preparing for completion day
- Arrange contents insurance for your new property
- Ensure all of the funds are with your Solicitors
- Ensure all of the legal documents are with your Solicitors
- Take meter readings for gas, water and electricity and notify utility suppliers of your move
- Update local council with your new details
- Arrange removals well in advance
- Ensure the property is left in good condition
 Problems that could arise on completion day
- Delay in the chain – When there is a big chain involved in a conveyancing transaction, there could be a significant delays in receiving the funds if you are at the top of the chain.
Delay of purchase funds – When purchasing a property, some people may use a combination of funds such as savings and a mortgage meaning that if the buyer or the lender delays on transferring the funds to the solicitors in time then it will cause a delay in completion as the completion cannot take place until the seller’s solicitors are in receipt of the funds and the buyer’s solicitors will not be able to send over the monies to them until they are in receipt of full funds.
You can contact our Conveyancing team here or call on 01604 936512 / 01908 953674 or email info@franklins-sols.co.uk.
The exchange of contracts is known to be one of the most important and one of the last steps of the conveyancing transactions. This is where the contracts that are signed by the sellers and buyers are exchanged between the solicitors usually via phone, it is also the point of the transaction where the buyer will be required to transfer the deposit monies over to the solicitors (usually 10% of the purchase price), if necessary. In some cases, the seller’s solicitors will agree to exchange contracts on NIL deposit meaning that no deposit is required to be transferred to the buyer’s solicitors in readiness for exchange.
The exchange of contracts will not take place until the buyer’s solicitors have carried out all the necessary and vital checks including property searches, source of funds checks, title checks and have all the signed paperwork returned by the buyer. Under Section 2 of the Law of Property Miscellaneous Provisions Act 1989 states that the agreement must be in writing, if the buyer and seller sign their own version then each document must contain all of the same agreed terms or else it will be void. Since effect of the Covid-19, some solicitors have made some changes to allow clients sign paperwork electronically.
Furthermore, the exchange and completion dates will be required to be agreed between all the parties before solicitors are able to proceed with exchange of contracts. The solicitors will not be able to exchange contracts without having a completion date agreed as this is written into the contract at a point of exchange. Once the dates have been agreed and the buyer’s solicitors are in receipt of the deposit monies, they will then contact you to obtain your authorities and will proceed with exchange of contracts; this can take place at any time of the day.
Once the contracts have exchanged, the buyer’s solicitors will then transfer the deposit monies to the seller’s solicitors (unless it is agreed to be ‘held to order) who will hold the monies in a client account until completion and you will be notified as soon as the exchange of contracts have taken place.
The sellers and the buyers can withdraw from the transaction at any time during the transaction as long as the contracts have not exchanged as neither party have a legal obligation to complete in England and Wales. However, once the contracts have exchanged, this becomes legally binding between the seller and the buyer meaning that no parties can withdraw from the transaction as both parties are legally committed to the transaction, or they will have to face a serious legal or financial penalty. By withdrawing from the transaction after the contracts have exchanged, it will suggest that the party is in breach of the terms in the contract; the penalties could include losing deposit monies, having to pay solicitors and third parties fees even if the transaction does not proceed to completion as well as pay interest to the other party in the contract. The risk of either the seller or the buyer withdrawing from the transaction is very low once the contracts have exchanged.Â
You can contact our Conveyancing team here or call on 01604 936512 / 01908 953674 or email info@franklins-sols.co.uk.
A Management Pack which is often known as ‘Sales Pack’ containing a set of forms and documents relating to the sale of the property where a service charge is paid to a specific Management Company who maintain shared facilities especially in the cases of flats and apartment blocks. For example, the pack will include the following:
- LPE1 (Leasehold Property Enquiries Form) or FME1 (Freehold Management Enquiries)– This is usually completed by the Landlord or Management Company.
- Accounting information history
- Budgets
- Ground Rent, Service Charge Statements and any Arrears
- Any proposed increases in service charge
- Buildings insurance
- Fire risk assessment and asbestos report
- Detail of any proposed future maintenance works
- Any obligations expected from any new owner
- Notice fees, deed of covenant fees and other freeholder’s fees
In all leasehold transactions and occasionally in freehold transactions where there is a Management Company involved, the seller will be responsible for providing the Management Pack to the buyer’s solicitors for review and is payable by the seller. It is not a legal requirement to provide the pack to the buyer’s solicitors however the buyers solicitors nor the buyer may wish to proceed with the transaction without having a review of the pack as it does include vital information which they will be required to report on to their clients due to due-diligence and compliance.
It is crucial to understand that the management pack may be required when selling a freehold property also, this is often the case where the property is a new build and is part of a larger development where the owners are responsible to contribute towards the upkeep and maintenance of the common areas such as car parking, footpaths, and any other open spaces. The details of the Management Company are usually set out within the Title Deeds under the restrictions section.
The pack will also include any requirements and fees payable to the Landlord or management company for the transaction to proceed. There may be a fee to provide a certificate to comply with a restriction on the title against selling the property without the consent of the management company.
The cost of the pack will depend on the Management Company, each Management Company have their own fee and the prices can vary between £100-£500 and is usually produced within 2-4 weeks once it has been paid for therefore it is important that this is requested at the early stages of the transactions avoiding any further delays. However, some Management Companies offer an additional charge to expedite the pack. Once the buyer’s solicitors had a review, they may wish to raise additional enquiries with the Management Company for further clarification.
You can contact our Conveyancing team here or call on 01604 936512 / 01908 953674 or email info@franklins-sols.co.uk.