“You petition!” “No you petition!” Difficult considerations in Shareholders’ Disputes

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“You petition!” “No you petition!” Difficult considerations in Shareholders’ Disputes

Where shareholders have fallen out, or where there are cross allegations of unfair conduct, there is often a tussle as to who should commence the court proceedings. Why you may ask yourself?

The answer to the above questions can be answered by considering what the court normally orders upon a finding that one party has acted unfairly to the other.

The normal order under the Companies Act where there is unfair prejudice, is that the guilty party is ordered to buy the innocent party’s shares (a purchasing order) at a price to be determined by the court.

Of course the typical order may seem most unfair to the aggrieved party who may wish to continue with the business so as to preserve their ongoing income. What should happen where the court finds that both parties have acted unfairly to each other?

Where there are competing claims as to who should effectively get the Company the court will have regard to what is in the best interest of the Company, the extent of any wrong doing, the view of other stakeholders and a party’s ability to buy the other party’s shares, so as to “look at the realities and practicalities of the overall situation, past, present and future.”

Be warned however, the Court can ignore the claims, and the relief sought by the parties, and order that the Company be wound up.

Richard Cooper

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