Remedies Available in Disputes Between Company Shareholders

Disputes between shareholders can disrupt a company's day-to-day operations and damage its commercial reputation. The remedy to pursue in such disputes depends on the nature of the disagreement.

Contractual Mechanisms Are Considered First

When a dispute arises, the first step is to review the dispute-resolution provisions in the articles of association (such as an arbitration clause, pre-emption rights or withdrawal rights, where present) and the general assembly mechanisms. Many disputes can be resolved through a general assembly resolution or by invoking a contractual provision, without recourse to litigation.

An Action for Dissolution for Just Cause

Where the relationship between shareholders has reached a complete impasse, a shareholder may seek dissolution of the company for just cause. As a more proportionate remedy than dissolution, the court may instead order that the claiming shareholder be bought out and removed from the company at the real value of their share.

An Action to Expel a Shareholder

Where a shareholder's conduct harms the company, breaches significant obligations, or renders their relationship with the other shareholders unsustainable, the other shareholders may apply to the court to have that person expelled from the company for just cause.

Actions for Damages

Where a shareholder's or manager's culpable conduct causes concrete harm to the company or to other shareholders, a separate action may be filed to recover that harm. Breaches by managers of their duty of care and loyalty are the most common basis for such actions.

Practical Tips

When a dispute arises, reviewing your articles of association and general assembly minutes with a lawyer before filing suit helps you both identify the most suitable remedy and be in a strong position in any future litigation. Keeping correspondence and financial records in good order can be decisive for proving your case.

This article is provided for informational purposes only and does not constitute legal advice. Please contact our team regarding your specific situation.