Shareholder Dispute in Deadlock Company

Shareholder Dispute in Deadlock Company

SE-Solicitors were instructed by their client who held a 50% share of a successful company alongside one other shareholder. Unfortunately, the relationship between the two shareholders had broken down entirely, and as a result the client wished to purchase his partner’s shares on reasonable terms.

SE-Solicitors advised the client on the difficulties he faced in his position in this deadlock company. The next step was to attempt to negotiate an agreement with the other shareholder through his own solicitors. This process was convoluted and challenging, and was drawn out, extending to a period of over two years.

The Value to the Client:

The client greatly benefitted from the cross-departmental involvement provided by the SE-Solicitors team. Detailed expert knowledge was required from both the Corporate & Commercial department and the Dispute Resolution department, and it was only through bringing this expertise together that the client could be advised on the best way forward.

Director Anis Waiz of the SE-Solicitors Dispute Resolution was brought into the matter to provide his expertise and advise the client on his options, including an unfair prejudice petition. The team advised the client on tactics, including the fact that mediation was required on the basis of a draft petition for unfair prejudice, which they wished to provide to the other shareholder.

This mediation was, as expected, acrimonious and unsuccessful, and so although negotiations continued, the team was now able to file an unfair prejudice petition and pleadings were exchanged. The factual basis of the case was investigated, and witness proofed, to encourage negotiation between the parties. Eventually a complex settlement was negotiated which involved forming a new company, issuing shares in that to the client effecting a share swap for his shares in the trading company, and then using the holding company to buy the other’s shares on deferred terms, subject to security granted to the other shareholder over the shares in the holding company and the trading company and assets of both.

In many ways, this settlement was achieved against the odds, as the client found himself in a very difficult legal position. He had limited rights for a shareholder in a deadlock company, and a fellow shareholder who was both vindictive and antagonistic. Through a lot of work the SE-Solicitors team achieved the desired outcome for their client, for which he expressed great appreciation.