How To Avoid and Resolve Disputes Between Shareholders

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Follow our series of 2 mn videos highlighting typical problems for shareholders/directors with the solution.

The urgent steps sole directors in companies regulated by the Model Articles must take following a court decision

Can a shareholder walk out of the company yet not be required to sell his shares to the remaining shareholders?

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Agreements For Shareholders  

Running a business with others is much like marriage. In fact many will say they spend more time with their business partners than with their spouses.

Within that time they will share joy and heartache as fortunes rise and fall and, just like in marriage, the relationship can turn sour as problems develop and differences set root.

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Mediation For Shareholders

Mediation is the name given to a broad range of processes for assisting in the resolution of disputes without the delay, cost, anxiety and risks associated with asking a judge sitting in a court to determine the matter.

Importantly the mediator can often help the parties reach a creative solution that no judge has the power to impose.

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Negotiation Strategy Advice

Disputes between shareholders usually persist because one or other, or more often both, of the parties do not fully and totally understand all of the rules of corporate governance, the rights and duties of each person, the options each has and, importantly, the damage each can individually suffer in the absence of reaching a fair and sensible agreement. 

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What My Clients Say

"Having your support and advice back then, was paramount in order to get the best possible outcome. Thank you again Graham for all the help. My file can now go into your "success cases" folder! "

MK - Luton

"Graham has a lot of knowledge and experience in mediation and helped us massively. Would definitely recommend."

Liam - London

"Graham is extremely knowledgable, & was able to help me with a very difficult business situation I thought had no solution. Highly recommend."

Tina-London

"Was recommended to speak to Graham via a forum and I am so glad I spoke with him. He has got us out of a very difficult decision with regards to the call of an EGM and multiple director dismissals with fantastic advice and a full review of our articles. There isn't much Graham didn't know when it comes to company law, which made our argument easier to put into practise and even harder to fights against for the opposition. We continue to use his services and I would highly recommend anyone with a company dispute, who want to avoid huge court bills, to contact Graham at 'See you out of court'!"

Tony - Kent

"Graham helped resolve a complex and acrimonious company dispute which otherwise might have led to a costly court case. I would not hesitate to recommend him to others." 

Jonathan - Bristol

"I cannot recommend Graham's services highly enough. His calm, thoughtful, knowledgeable professionalism managed against all the odds to bring a successful mediated resolution to our protracted and bitter shareholder dispute."

Paul - Pembrokeshire

Graham explained everything very clearly, and managed to persuade the justifiably cautious other party that he was acting in the equal interests of both sides. When the day of the mediation came just two weeks later Graham proceeded quickly and fairly, and we ended the day with an agreement that both sides were happy with. I can honestly say that would not have happened without Graham’s assistance - I suspect we’d be still in the process of expensive legal letters back and forth. I would strongly recommend his services to anyone in a a similar situation.” - Simon, London

"The service, guidance and support received from Graham throughout my company exit negotiations was second to none and I was very satisfied with the final outcome. I would recommend Graham to anyone with a boardroom dispute.” 

Bob - Essex

"We found ourselves in a particularly difficult position with plans for expansion being stymied by a Shareholder and Director who had become completely distant from all aspects of the business. Graham Ross guided us through a strategy and was pivotal in our boardroom during a long day of negotiating. All parties ended up shaking hands on a deal which left us all happy and we are now forging ahead with our expansion. If it weren't for Graham we would almost certainly have ended up in court and fighting a bitter battle."

Jeremy - London

"I have had the pleasure of using Graham's services on a number of times, and have always had a solution that probably would not have happened had the problems gone legal. I have always found Graham to be efficient, conscientious and extremely thorough exploring avenues you wouldn’t even think about,. I would recommend him to anybody."

Michael - Burnley

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Shareholder Agreements

Running a business with others is much like marriage. In fact many will say they spend more time with their business partners than with their spouses.

Within that time they will share joy and heartache as fortunes rise and fall and, just like in marriage, the relationship can turn sour as problems develop and differences set root.

Shareholder Mediation

Mediation is the name given to a broad range of processes for assisting in the resolution of disputes without the delay, cost, anxiety and risks associated with asking a judge sitting in a court to determine the matter.

Importantly the mediator can often help the parties reach a creative solution that no judge has the power to impo

Negotiation Strategy

Disputes between shareholders usually persist because one or other, or more often both, of the parties do not fully and totally understand all of the rules of corporate governance, the rights and duties of each person, the options each has and, importantly, the damage each can individually suffer in the absence of reaching a fair and sensible agreement. 

Shareholder Agreements

Running a business with others is much like marriage. In fact many will say they spend more time with their business partners than with their spouses. Within that time they will share joy and heartache as fortunes rise and fall and, just like in marriage, the relationship can turn sour as problems develop and differences set root. In marriage we are seeing growing interest in that US import, the Pre-Nuptial Agreement, which sets out how to deal with a parting of the ways without excessive feeding of lawyers. Within companies the equivalent way to avoid disputes and stalemate situations in private companies is to enter into a Shareholders Agreement.

 

So many problems that come to me as a shareholder mediator would have been very simply resolved had the clients entered into a Shareholder Agreement.

 

A Shareholders Agreement is essentially a contract in which you all set out, in much more flexible way and in much more detail than in the standard Articles of Association, the relationships and procedures within the company and, importantly, the rule book you want to submit to, in relation to a number of issues that can arise in the future. To give but two common examples:-

 

* In the absence of a Shareholders Agreement, if a working shareholder decides to walk away, or is dismissed for misconduct, the others usually cannot force him to give up his shares. If they fail to be able to offer a price with which he agrees, he can sit back and collect his share of dividends and any future share of the sale of the company even though he does not lift a finger to contribute to its future growth. Deciding not to issue dividends is no answer as the company will then be forced to pay unnecessarily high levels of tax as drawings will be treated as salary. In a well written Shareholders Agreement, he can be forced to sell his shares to the others at a price determined, in the absence of agreement, by an independent valuer or, if he is dismissed through misconduct, for a nominal sum.

 

* In the absence of a Shareholders Agreement, if the overwhelming majority of the shareholders, say 90%, wanted to sell to a third party, they could be prevented by the 10% shareholder , who may not work in the business nor make any active contribution to it, refusing to sell his shares. A Shareholders Agreement can contain a clause to force the minority, or say a minority below a certain percentage, to sell.

 

 Other situations that can be covered include:-

                                                        

  • Death or incapacity of a shareholder
  • Relationships between different classes of shares to be issued in the future with varying rights over dividends and voting rights eg for employees
  • Ownership of Intellectual Property Rights
  • Agreement on the extent of the business activities - what happens when targets achieved etc
  • Specific protective rules for minority shareholders
  • Specific arrangements for meetings and business planning
  • Information to shareholders (eg investors) not sitting on the Board
  • Identifying certain Resolutions that you may wish will require higher voting levels to be passed eg 75% or 100%
  • Specific rules for handling disputes so they are not left to fester or drag you all into the courts

 

There is in fact no limit to what could be included. In fact the more situations you anticipate and for which you set out clear guidance and rules as to how to deal with them, the less likely it is that a dispute will arise in the first place. If a dispute does arise, the Shareholders Agreement should also set out the manner in which it can be quickly resolved. In this way you can more easily focus more of your time on making the business work rather than arguing amongst yourselves to the possible detriment of the company and your own interests.

 

Unlike the Articles of Association, which are available online from Companies House website, a Shareholders Agreement is private and cannot be read by the public. It can also be more easily and speedily amended as your business objectives change in time. Importantly for the protection of each individual shareholder, it requires the agreement of all shareholders before being changed.

 

A well drawn up Shareholder Agreement will also have the advantage of making the company more attractive to investors who do not want to see the company suffer through unresolved internal conflict that could cause possible stalemate situations or simply lead to a lack of teamwork and thus less success.

If you ask us to draw up a Shareholders Agreement, you will be able to access a 34 point questionnaire that will help you inform us of which clauses will be most appropriate for your own Shareholders Agreement. Each question explains the nature of the relevant clauses to enable you to make an informed decision. 

Meet Graham

I am a retired solicitor, active as an accredited business mediator and negotiator specialising in the art of negotiating solutions as opposed to  burning money through the courts.  I am  also a recognised expert in the fast developing field of  Online Dispute Resolution (ODR) which exploits the power of technology to facilitate resolution. 

My  casework experience as a mediator and negotiator is primairly focused on disputes betweeen compamy shareholder in private limited companies and franchising disputes.

I have  developed novel techniques within the field of Interest-Based Mediation which operates beyond the traditional areas of compromise by helping each party to the dispute to consider interests they may have that, even if peripheral to the main issue, can be affected adversely as a consequence of the dispute not being resolved, no matter what the outcome of any litigation. By focusing on identifying all interests, including those not obviously linked, that may be impacted by the continuation of the dispute and examining in detail the potential damage each side may suffer on the absence of agreement, the parties themselves then begin to express their own desire to resolve the matter between themselves. In other words, it works to bring the parties to the point where it is they, the parties in dispute, who begin to press for settlement, not the mediator seeking to coax them into it.

IN BRIEF

•UK lawyer/mediator and, for 22yrs, writer, advisor, teacher, developer, presenter on Online Dispute Resolution (ODR)

• Founding Board member of The International Council for Online Dispute Resolution, the global leaders in the field of technology assisted dispute resolution

•Fellow of The National Center For Technology and Dispute Resolution at University of Massachusetts (Amherst)

•Official Observer to the Council of Europe’s European Cyberjustice Network comprising of the justice departments of all 46 mermber countries of the Council of Europe.

•Member of the UK Civil Justice Council’s ADR (Alternative Dispute Resolution) Working Party


•Advisor on ODR to the courts in UK, Bulgaria, Lithuania, Canada, The Council of Europe and currently contracted  to advise the courts in Ukraine who have implemented my recommendations for an online court.

• Run a  training course on ODR


* Ran a pilot for the Ministry of Justice of asynchronous online mediation in two small claims track courts (24 live cases).


* Hosts international conferences on ODR

* Have ran two pilots for eBay of online mediation for consumer disputes.


* Former VP (Europe) for Modria, a leading US developer of systems of ODR, now acquired by Tyler Technologies, providers of ODR technology to courts.


* Designed and wrote the code for QUILL,the first combined accounting and time recording package for solicitors.


* Co-founder of Lawtel, a former online legal research service.

*I am a  registered mediator with The Civil Mediation Council.

LESS BRIEF

* I was a member of the ODR Advisory Group appointed by the Civil Justice Council (CJC)  to advise the UK's Ministry of Justice on the role of ODR in a modernised civil justice system. Our Report was published in February 2015 . The Report by Lord Justice Briggs into the future structure of the court system  recommended our proposal in the CJC Report for an online court offering ODR solutions be actioned.  The first online court has now opened and in public Beta testing for civil money claims.


A little bit of history was made in February 2019 when I helped parties to a dispute running through the then newly established online civil money court  was settled within an hour using Artificial Intelligence. See this news article.


I was also  a member of the Civil Justice Council's 6 person ADR Working Group tasked to advise on how to increase use of Alternative Dispute Resolution, and in particular mediation 

In 2014, I  was invited to advise in meeting the Committee of Legal Affairs and Human Rights of the Council of Europe on the impact of ODR on access to justice and human rights. The Committee produced a draft Resolution, since adopted by the Council, which calls on all 47 member States to promote the development and use of Online Dispute Resolution.

In February 2016, I was invited  to be an advisor  to an EU funded research project led by the Faculty of Law at Salamanca University in Spain to consider the role of online mediation in cross-border disputes.


As well as my private practice as a mediator and negotiator in company shareholders, I have been Head of the European Advisory Board for a Silicon Valley spin-off from eBay and PayPal called Modria Inc. The Modria team, now spread across offices in the USA, UK and India,  are part of Tyler Technologies. They designed, built and ran the dispute resolution systems pioneered by eBay and PayPal .


I have  been an innovator in the field of mediation, developing two areas of novel specialism being disputes between shareholders in private companies leading to stalemate situations (see www.BoardroomResolve.com) and mediating online .

I co-founded the UK's first ODR service, a blind bidding service called We Can Settle in 2001, and subsequently the online mediation service The Mediation Room, which was launched by Lord Woolf , former Lord Chief Justice, at the Law Society and on which platform trials have been conducted for PayPal, the UK Small Claims Court, the Law Council of Australia  and other organisations.


I was a member of the Working Party of the European Committee on Standardisation (CEN) which developed a Workshop Agreement on standards for Online Dispute Resolution and  a member of the EU funded EMCOD project led by the University of Tilburg and which has developed an online tool for the measurement of justice through ODR.

I speak regularly at international conferences on the impact of the law on the Internet and e-commerce and on technology in the judiciary and Alternative Dispute Resolution. I have  been presenting regularly at conferences on ODR since 2002 when the now annual International Forum on Online Dispute Resolution was first launched at the Palais Des Nations in Geneva by the United Nations Economic Commission for Europe. The Forum, which  has travelled around five continents, was  hosted by myself in 2007 at the University of Liverpool. I have presented at events in the Czech Republic,  Bulgaria , Poland, Azerbaijan, (where I chaired the workshop on ODR at the Internet Governance Forum) France, Argentina, USA, Canada, Hong Kong, Australia, New Zealand, Croatia,  Lithuania, India and other places.  In 2012 I was invited by the European Commission to attend an expert group round table in Brussels on introducing a new European Law on Alternative Dispute Resolution and ODR for Business to Business disputes across Europe.   


In 2012 I was invited to join a working party set up by the UK Ministry of Justice to create a Business Dispute Resolution Commitment to encourage less recourse to the courts.


I was the founder of LAWTEL the online legal information update service now owned and operated  by
ThomsonReuters.



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Graham giving a talk at a Conference in Vilnius, LIthuania in 2023