Shareholder dispute settled at mediation

Acted for a 25% shareholder in an IT company who was wrongfully removed from the company and left unable to realise their investment, in both time and money, into the company.

The challenge: a majority shareholder who was willing to take active steps to reduce minority shareholder value

Our client and the other shareholder, holding 75%, had fallen out. Using the powers given to them by their shareholding, the majority shareholder then removed our client as a director and employee. This meant our client no longer received any income from the company, which continued to trade successfully.

The majority shareholder then offered only a nominal sum to buy out our client’s shares. When our client refused the offer and threatened legal action the majority shareholder placed the company into a Members Voluntary Liquidation (MVL).

Following a short marketing campaign only one buyer was found for the business, a company controlled by the majority shareholder and set up for the purpose. The price paid for the business did not reflect its commercial value and produced a negligible return for the shareholders.

Our approach: presenting a petition under s.994 of the Companies Act with the aid of third party funding

Our client could not afford to bring legal proceedings so third party funding and After the Event insurance (ATE) was obtained. We agreed to act under a Conditional Fee Agreement (CFA). This enabled a petition to be brought under s.994 of the Companies Act on the grounds that the majority shareholder’s actions were unfairly prejudicial to our client.

The outcome: recovery of an acceptable value for the minority shareholding

The parties agreed to mediate and at the mediation a settlement was reached under which our client received an acceptable sum for their shares.

How we made a difference: obtaining justice for a minority shareholder

The majority shareholder was determined to avoid paying the minority shareholder for their shares. It was only through our intervention and willingness to undertake the matter under a CFA that value was recovered for the shares.

If you would like to discuss or need help with a similar case, please contact our shareholder disputes team.