TRW & Co · Disputes & Arbitration
Shareholder and Partnership Dispute Solicitors in London
Shareholder dispute solicitors London founders, investors and family owners instruct help them resolve breakdowns in trust without destroying the business. English law offers powerful remedies, from unfair prejudice petitions and derivative claims to just and equitable winding up, but most disputes end in a buyout. The real questions are leverage, valuation and how to get there at proportionate cost.
Key pointIn owner-managed companies built on personal relationships, excluding a shareholder from management can be unfairly prejudicial even if every step followed the articles; a prompt, fair offer to buy their shares is often the best protection against a petition.
At a glance
Unfair prejudice petitions
Sections 994 to 996 Companies Act 2006 let members seek relief, most commonly an order that their shares be bought at a fair value.
Derivative claims need permission
Under sections 260 to 264, members can sue directors on the company's behalf, but only with the court's permission to continue.
Removing a director
Shareholders can remove a director by ordinary resolution under section 168, with at least 28 days' special notice under section 312.
5% can requisition a meeting
Members holding at least 5% of paid-up voting capital can require directors to call a general meeting under section 303.
Winding up as last resort
Section 122(1)(g) Insolvency Act 1986 allows winding up on just and equitable grounds, usually where trust has broken down completely.
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What shareholder and partnership disputes cover
Shareholder dispute solicitors London owner-managers, investors and founders instruct are usually dealing with a breakdown of trust between people who own a business together. The dispute may be between majority and minority shareholders, between founders and investors, between joint venture partners, or between partners in a partnership or LLP. The stakes are both financial and personal, and the business itself can suffer while the owners fight.
Common flashpoints include exclusion of a shareholder from management, removal of a director, dilution through new share issues, diversion of business opportunities, excessive remuneration paid to some shareholders instead of dividends to all, disputes about leaver provisions and share valuations, deadlock at board or shareholder level, and allegations that directors have breached their duties.
A shareholder disagreement becomes a legal question when one party starts using its powers under the articles, a shareholders' agreement or the Companies Act 2006 against another. Each move, such as calling a meeting, issuing shares or removing a director, has legal consequences that may be difficult to undo. Getting advice before taking or responding to such steps preserves options.
Many disputes are best prevented by good drafting at the outset; our corporate governance team advises on articles and shareholders' agreements, and our article on shareholder agreements explains what to include.
The legal framework: constitution, statute and the courts
The company's constitution and shareholders' agreement
Under section 33 of the Companies Act 2006, the company's constitution binds the company and its members as if each had covenanted to observe it. The articles set out how shares are transferred, how directors are appointed and removed, and how decisions are made. A shareholders' agreement sits alongside the articles as a private contract, often containing reserved matters, pre-emption and leaver provisions, deadlock mechanisms, restrictive covenants and dispute resolution clauses. The first step in any dispute is to read both documents together.
Key statutory rights
- Unfair prejudice (sections 994 to 996). A member may petition the court on the ground that the company's affairs are being or have been conducted in a manner unfairly prejudicial to the interests of members, including the petitioner. Under Part 30, the court can make any order it thinks fit, most commonly an order for one party to buy the other's shares.
- Derivative claims (sections 260 to 264). A member may, with the court's permission, bring a claim on the company's behalf for negligence, default, breach of duty or breach of trust by a director. Scotland has a parallel procedure for derivative proceedings.
- Removal of directors (section 168). Shareholders can remove a director by ordinary resolution at a meeting, regardless of any agreement, but special notice of at least 28 days is required under section 312.
- Requisitioning a meeting (section 303). Members holding at least 5% of the paid-up voting capital can require the directors to call a general meeting.
- Just and equitable winding up. Under section 122(1)(g) of the Insolvency Act 1986, the court may wind up a company where it is just and equitable to do so, usually as a last resort.
Partnerships and LLPs
General partnerships are governed by the Partnership Act 1890, subject to any partnership agreement. Section 35 allows the court to dissolve a partnership in specified cases, including where it is just and equitable. LLPs are governed by the Limited Liability Partnerships Act 2000 and regulations that apply parts of the Companies Act, including the unfair prejudice remedy, with modifications; members can agree to exclude that remedy. The LLP agreement is therefore central to any dispute.
Key decisions for shareholder dispute solicitors London clients instruct
Most shareholder disputes end with one side buying the other out. The legal question is usually how to get there on the best terms and at proportionate cost. Shareholder dispute solicitors London clients rely on should help them choose the right lever early.
| Remedy | Who uses it | What it can achieve | Key limitations |
|---|---|---|---|
| Contractual rights under the articles or shareholders' agreement | Any party with rights under the documents | Enforce leaver, transfer, deadlock or reserved-matter provisions | Only as good as the drafting; may contain arbitration clauses |
| Unfair prejudice petition (s994) | Members, usually minorities | Wide relief, most often a share purchase order at a fair value | Expensive and evidence-heavy; must show prejudice that is unfair |
| Derivative claim (s260) | Members acting for the company | Recovery for the company from directors or third parties | Court permission needed; recovery goes to the company |
| Just and equitable winding up (s122(1)(g)) | Members, often in quasi-partnerships | Ends the company where trust has broken down | Last resort; may be refused if another remedy is available |
| Removal of director (s168) | Majority shareholders | Removes a director by ordinary resolution | Special notice; may trigger unfair prejudice claims or compensation |
| Negotiated exit or mediation | All parties | Confidential buyout on agreed terms and timing | Needs willingness on both sides; valuation gaps |
What makes prejudice unfair
In O'Neill v Phillips [1999] UKHL 24, the House of Lords held that unfairness is generally judged by reference to the terms on which members agreed to associate, found in the articles and any collateral agreements, together with equitable considerations in companies built on personal relationships. In such "quasi-partnerships", recognised in Ebrahimi v Westbourne Galleries [1973] AC 360, exclusion from management after an understanding that a shareholder would participate can be unfairly prejudicial even if the articles were followed.
Valuation of shares
Valuation is often the real battleground. Key questions include the valuation date, whether a minority discount applies (courts often do not apply one in quasi-partnership cases) and whether the value should be adjusted for the effects of the prejudicial conduct. Expert accountancy evidence is almost always needed, and early single-joint-expert valuations can narrow the gap and promote settlement.
Deadlock in 50:50 companies and joint ventures
Where two shareholders hold equal stakes, or a joint venture gives each partner a veto, disagreement can paralyse the board. Well-drafted shareholders' agreements deal with this through escalation to senior executives, mediation, and exit mechanisms such as "Russian roulette" or "Texas shoot-out" clauses, under which one party names a price at which it will either buy or sell. These clauses work only if the parties can fund a purchase and the triggers are precise.
Where the documents are silent, the options are narrower. A negotiated sale of the whole business, a demerger, or a just and equitable winding-up petition may be the only routes out. Because winding up destroys value, the threat of it is more often used to bring the other side to the table than pursued to an order.
Investor and founder disputes
In venture-backed companies, disputes often turn on investor consent rights, anti-dilution protection, good and bad leaver definitions and drag-along rights. Founders who leave may lose some or all of their shares at nominal value if they are treated as bad leavers, so the drafting of those definitions, and the facts surrounding a departure, matter greatly. Investors, for their part, need to exercise consent rights in line with the documents and any duties attached to board seats they hold. Our venture capital team advises on these provisions.
The articles tell you who has power. The history of the relationship often tells the court whether that power was used fairly.
How a shareholder dispute usually unfolds
Many disputes settle at or before stage four. Unfair prejudice petitions are normally issued in the Business and Property Courts, often in the Insolvency and Companies List, and follow a case management timetable set by the court.
- Review of documents and history. Analyse the articles, shareholders' agreement, board and shareholder minutes, and the history of the relationship, including any informal understandings.
- Immediate protective steps. Secure access to company information, record exclusion or objectionable conduct in writing, and consider urgent injunctions if assets or opportunities are being diverted.
- Letter of claim and offers. Set out the complaint and proposed remedy, often an offer to buy or sell at a fair value determined by an independent expert, which can carry significant weight later.
- Mediation and negotiation. Explore a negotiated exit, including deferred consideration, security and restrictive covenants, with valuation input.
- Proceedings. Issue a petition, derivative claim or contractual claim; serve on the company and respondents; deal with any application to strike out or stay for arbitration.
- Case management and evidence. The court sets directions for disclosure, witness statements and expert valuation evidence.
- Trial and remedy. At trial the court decides liability and, if established, the remedy and valuation basis; implementation follows, often a share transfer against payment.
Documents and evidence to assemble
Unfair prejudice claims are often won or lost on contemporaneous evidence of what the parties understood when they went into business together. Shareholder dispute solicitors London petitioners and respondents instruct will look for that evidence first.
Constitutional documents
Articles in every version, the shareholders' agreement and amendments, service agreements and any side letters. Check filed versions at Companies House against signed originals.
Decision-making records
Board and shareholder minutes, written resolutions, management accounts, budgets and emails showing how decisions were actually made and who was consulted.
Financial evidence
Statutory accounts, dividend history, remuneration records, related-party transactions and bank statements. These support complaints about value extraction and inform valuation.
Relationship history
Messages and notes about the founding understanding: roles, profit sharing, exit expectations. In quasi-partnership cases these can be decisive.
If you are a director and shareholder, keep your two roles distinct. Directors owe duties to the company under sections 171 to 177 of the Companies Act 2006, including the duty to promote its success. Using board powers to gain advantage in a shareholder dispute can itself be a breach of duty and evidence of unfair prejudice.
Risks and common mistakes
Shareholder disputes escalate quickly and the costs can exceed the value at stake. These are the risks shareholder dispute solicitors London clients consult see most often.
Excluding a shareholder without considering the consequences
Removing a shareholder-director from the board, cutting off information or stopping their salary may be within the majority's formal powers. In a quasi-partnership, though, the court may regard it as unfairly prejudicial if it breaches an understanding that the shareholder would participate in management. The usual remedy is an order for the majority to buy the minority's shares at a fair value, often without a minority discount. Before acting, the majority should consider making a fair offer to buy the shares, which can be a strong answer to a later petition.
Diverting business or paying excessive remuneration
Moving opportunities to a new company, or paying high salaries and bonuses to some shareholders instead of dividends to all, are common grounds for unfair prejudice petitions and derivative claims. Directors may be required to account for profits and compensate the company, and courts can adjust share valuations to reverse the effect. Keep related-party transactions transparent, approved in accordance with the articles and the Companies Act, and documented at the time.
Using company money to fight the dispute
An unfair prejudice petition is essentially a dispute between shareholders, and the company is usually only a nominal party. Using company funds to pay for the majority's defence can be criticised by the court and may itself be prejudicial. Companies should normally take a neutral stance, with costs borne by the individuals. Where the company does have a genuine interest, its participation should be considered with advice and documented by the board.
Overlooking an arbitration or expert determination clause
Shareholders' agreements often require disputes to go to arbitration, or valuations to be decided by an expert. The Court of Appeal has held that unfair prejudice disputes can be arbitrable, so a court petition may be stayed if it falls within an arbitration clause. Check the documents before issuing proceedings, and consider whether arbitration's privacy is an advantage. Our international arbitration team advises where this arises.
Delay and acquiescence
There is no fixed limitation period for unfair prejudice petitions, but long delay can lead the court to refuse relief or affect the remedy, and underlying claims such as breach of duty are subject to limitation. Continuing to accept the position without objection can also be treated as acquiescence. Object promptly in writing, reserve rights, and take advice before the position becomes entrenched.
Cross-border angle: Bangladesh, the Gulf, Singapore, China and the EU
Many UK companies have shareholders abroad, and many overseas joint ventures use English law shareholders' agreements with English companies as holding vehicles. The English courts have jurisdiction over unfair prejudice petitions concerning companies incorporated in England and Wales, wherever the shareholders live, though service on foreign respondents may require permission. Where the company is incorporated elsewhere, local company law will usually govern its internal affairs, even if the shareholders' agreement is governed by English law.
Bangladesh
Family businesses and joint ventures spanning the UK and Bangladesh often hold shares in both jurisdictions. A dispute may require proceedings in England over the UK company and parallel action under Bangladeshi company law over the Bangladeshi entity, with care to avoid inconsistent outcomes. TRW & Co's Dhaka headquarters works with the London office on these matters; see our UK–Bangladesh disputes and Bangladeshi businesses in the UK pages.
The Gulf, Singapore, China and the EU
Joint venture vehicles in the UAE free zones, Singapore and elsewhere have their own company law remedies, and shareholders' agreements may choose arbitration in Dubai, Singapore or London. Enforcing an English judgment or award against a shareholder abroad depends on local recognition rules. Shareholder dispute solicitors London clients engage should identify where each party's shares and other assets are held before choosing a forum, and our joint ventures team can help restructure arrangements after a dispute.
How TRW & Co helps
TRW & Co's London office is authorised and regulated by the Solicitors Regulation Authority. We act for minority and majority shareholders, directors, investors, partners and LLP members, and for companies caught in the middle. Where advocacy in the higher courts is required, we instruct specialist counsel.
Early strategy
We review the constitutional documents and history, identify each side's leverage, and set out realistic exit routes and their cost.
Negotiated exits
We negotiate and document share buybacks and transfers, including deferred consideration, security, warranties and restrictive covenants.
Petitions and claims
We bring and defend unfair prejudice petitions, derivative claims, just and equitable winding-up petitions and contractual claims.
Urgent relief
We seek or resist injunctions to stop share issues, asset transfers or meetings, working with our injunctions team.
Board and meeting advice
We advise on requisitioned meetings, director removals and board conduct during the dispute to reduce legal risk.
Partnership and LLP disputes
We advise on expulsion, retirement, dissolution and accounting between partners and LLP members under the governing agreement.
See all of our practices, or read our guide to unfair prejudice petitions.
Checklist for decision-makers
Whether you are the majority or the minority, shareholder dispute solicitors London businesses use will want these points addressed early.
- Gather every version of the articles, shareholders' agreement and service agreements.
- Check for arbitration, expert determination, deadlock and leaver provisions.
- Write down the founding understanding on roles, profits and exit, with supporting documents.
- Record any exclusion, information refusal or objectionable decision in writing, promptly.
- Separate your conduct as director from your interests as shareholder.
- Do not use company funds for personal dispute costs without advice.
- Obtain an early view on share valuation and the likely range.
- Consider making or inviting a fair offer to buy or sell shares.
- Assess urgent risks to assets, customers or opportunities.
- Take advice before acting; contact our London office.
Shareholder dispute solicitors London owners trust should help them reach a fair exit with the business intact. That is the aim we start from.
Frequently asked questions
01What is an unfair prejudice petition?
It is an application to court under section 994 of the Companies Act 2006 by a member who claims the company's affairs have been conducted in a way that is unfairly prejudicial to their interests as a member. Examples include exclusion from management in a quasi-partnership, diversion of business, excessive remuneration or improper dilution. If the petition succeeds, the court can make any order it thinks fit, most often requiring the majority to buy the petitioner's shares at a fair value.
02Can a majority shareholder force out a minority shareholder?
Not simply by wanting to. A majority can remove a director by ordinary resolution, but cannot compel a shareholder to sell shares unless the articles or shareholders' agreement provide for it, for example through leaver or drag-along provisions. Using majority power to exclude a minority in a quasi-partnership may be unfairly prejudicial. A negotiated buyout at a fair value is usually the safest way to separate.
03How are shares valued in a shareholder dispute?
Usually by expert accountants, applying a method suited to the business, such as earnings, assets or discounted cash flow. The key legal questions are the valuation date, whether a minority discount applies and whether to adjust for the effect of any wrongdoing. In quasi-partnership cases courts often value a minority stake pro rata without a discount. The shareholders' agreement may also prescribe a valuation mechanism, which will generally apply to contractual transfers.
04What is a derivative claim?
A derivative claim is brought by a shareholder on behalf of the company, for a wrong done to the company, such as a director's breach of duty. Because the company is the proper claimant, the shareholder must obtain the court's permission to continue the claim under sections 260 to 264 of the Companies Act 2006. Any recovery goes to the company, not the shareholder. It is often used where wrongdoers control the board and will not sue.
05Can I be removed as a director if I own shares?
Yes. Under section 168 of the Companies Act 2006, shareholders can remove a director by ordinary resolution at a meeting, whatever any agreement says, provided special notice of at least 28 days is given. The director can make representations and be heard at the meeting. Removal does not take away your shares, and if you had an understanding that you would participate in management, removal may support an unfair prejudice petition. Employment rights may also be affected.
06How are partnership disputes different from company disputes?
Partnerships are governed by the partnership agreement and the Partnership Act 1890, which fills gaps such as how profits are shared and when the partnership dissolves. Partners owe each other duties of good faith. The court can order dissolution in specified cases, including where it is just and equitable. LLPs are governed by their LLP agreement and LLP legislation, and the unfair prejudice remedy applies unless the members have agreed to exclude it.
07Should we mediate a shareholder dispute?
Often, yes. Most shareholder disputes end in a buyout, and mediation allows the parties to agree price, payment terms, restrictive covenants and announcements confidentially, without the cost and publicity of a trial. Courts expect parties to consider ADR and can order it. Mediation works best once each side has a realistic view of share value, so early valuation evidence and a clear understanding of the legal merits improve the chances of settlement.
Sources and official materials
- Companies Act 2006, Part 30 (unfair prejudice) — Sections 994 to 999: protection of members against unfair prejudice
- Companies Act 2006, Part 11 (derivative claims) — Derivative claims in England, Wales and Northern Ireland, and Scotland
- Companies Act 2006, section 168 — Removal of a director by ordinary resolution
- Insolvency Act 1986, section 122 — Grounds for winding up by the court, including just and equitable
- Partnership Act 1890 — Default rules for partnerships and dissolution by the court
- Companies House — Public filings, registers and company records
General information only, current as at 21 October 2026. It is not legal advice and does not create a solicitor–client relationship. It reflects the law of England and Wales unless stated otherwise; Scotland and Northern Ireland have separate legal systems, and the law changes frequently. Check current official sources and take advice on the facts of your matter.