Shareholder disputes in owner-managed companies are rarely just about money. Business partners who started out as friends, or as family, find they no longer agree on where the company is going, and every board meeting gets harder.
If you recognise that, here are five things worth doing before anyone asks a lawyer to send a legal notice.
1. Read the documents
Find the memorandum and articles of association and any shareholders’ agreement. They often say how shares are valued, whether a leaver must sell, how deadlock is broken and whether disputes go to court or to arbitration. Many disputes are settled by a clause nobody remembered.
2. Keep the company running
Keep paying staff and suppliers, keep the trade licence and visas renewed, file the accounts and the corporate tax return on time, and keep holding board meetings. A court or tribunal looks harshly on anyone who lets the business suffer to make a point.
3. Don’t move money or lock people out
Changing bank mandates, removing a director’s system access or paying yourself a large bonus can turn a disagreement into a claim against you, whether under DIFC company law, which protects shareholders from unfairly prejudicial conduct, or under the federal Commercial Companies Law. Take advice first.
4. Write things down
Keep a short, factual note of meetings and decisions. Messages written in anger will be read by a judge one day, translated into Arabic if the case is onshore, so write as if they will be.
Most shareholder disputes end in one side buying the other out. The only questions are when, and at what price.
5. Consider mediation early
Mediation is confidential, quick and much cheaper than court or arbitration. A day with a good mediator often gets to a buyout figure that both sides can live with. We represent clients at mediation regularly, and an early case assessment from us costs AED 7,500 plus VAT.
If you’re in the middle of a dispute, call Chris Lowe for a free 20-minute conversation. It’s confidential whether or not you instruct us.
