Director Disputes: Litigation and Dispute Resolution

Director disputes within private companies can often pose significant challenges to the day-to-day operations and future of the business.

Disputes between directors are common and can often stem from disagreements over the company’s strategy and approach, governance issues, or specific director’s conduct. For example, conflicts may arise over the remit of a director’s authority, appointments or removal of directors, and claims of misconduct, such as breaches of duty or conflict of interest​.

When director disputes arise, it is advisable that parties involved seek legal advice to help resolve the dispute in a cost effective manner whilst protecting the future of the business and the interests of the company.

Company directors have a duty to promote the success of the business, avoid conflicts of interest, and prioritise the company’s well-being. The Companies Act 2006 outlines these fiduciary duties and provides a legal framework for the operation of businesses in the UK.

Types of disputes between directors

 

Director disputes can fall into several categories, each with their own specific challenges and implications for the company. Listed below are some detailed types of director disputes:

  • Strategic Disputes: Strategic disputes often involve disagreements over the company’s direction, including expansion plans, market strategy, and investment decisions. They often stem from different visions for the company’s future.
  • Operational Disputes: Conflicts may arise regarding the day-to-day management of the company, such as the allocation of resources, operational practices, and priorities.
  • Financial Disputes: These disputes revolve around the company’s finances, including profit distribution, reinvestment decisions, and financial strategy.
  • Governance Disputes: Disagreements might occur over the interpretation and application of the company’s governance documents, including the Articles of Association and the Shareholders’ Agreement.
  • Breach of Duty: A director may be accused of breaching their fiduciary duties, such as the duty to act within their powers, the duty to promote the success of the company, and the duty to avoid conflicts of interest.
  • Conflicts of Interest: Disputes may arise when a director’s personal interests clash with those of the company, leading to questions about their ability to make unbiased decisions.
  • Appointment and Removal of Directors: Disagreements can occur over the appointment of new directors or the removal of existing ones, especially if it involves minority shareholders or if the process does not follow the stipulated procedure in the Companies Act 2006.
  • Disqualification Proceedings: Directors may dispute legal proceedings aimed at disqualifying them from holding directorships due to misconduct or failure to comply with company law.
  • Disagreements Among Shareholders: These can escalate into disputes if the interests of minority shareholders are overlooked or if there’s a perceived imbalance in power or benefits.
  • Contractual Disputes: Directors’ service agreements may lead to disputes if terms are breached or interpreted differently by the parties involved.

 

Resolving director disputes

 

Resolving disputes between directors and shareholders often necessitates a careful review of the shareholders’ agreement, which can offer guidance on the procedures for conflict resolution.

Sometimes, it may become necessary to remove a director to protect the company’s interests. This action must be undertaken with careful adherence to company law, ensuring that the process respects the rights of minority shareholders and the director in question. The Companies Act 2006 stipulates that a director can be removed by ordinary resolution, but the process involves specific steps that must be followed to avoid legal complications.

It is also imperative for directors to adhere to the company’s articles of association and avoid conflicts of interest that could harm the company. When disputes cannot be resolved internally, seeking legal advice is often the best course of action. A legal expert can provide guidance on how to navigate the complexities of company law and ensure that any resolution aligns with the best interests of the company and its stakeholders.

How can Expert Commercial Law assist?

 

If you are a shareholder of a limited company or any other business and are a part of a dispute with other shareholders, our panel of solicitors can assist you.

All of the shareholder and partnership dispute solicitors on our panel have the experience and expertise required to take on your case. Each solicitor is vetted before being allowed onto our panel, and we only select the best in the business. All of our solicitor firms are authorised and regulated by the Solicitors Regulation Authority (SRA).

Our solicitors also help with commercial claims, such as breach of contract and CCJ removal.

Please note we are not a firm of solicitors; however, we maintain a panel of trusted and regulated legal experts. If you contact us in relation to a commercial law case, we will pass your case on to a panel firm in return for a fee from our panel firms. We will never charge you for passing on your case to a panel firm. 

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Please note, we are not a firm of solicitors; however, we maintain a panel of trusted and regulated legal experts. If you contact us in relation to a commercial law case, we will pass your case onto a panel firm in return for a fee from our panel firms. We will never charge you for passing on your case to a panel firm. 

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