A solvent business can be de-stabilised by problems between the shareholders or partners. Shareholders who are also working directors can find it difficult to make the necessary decisions on strategy if their working relationship has broken down.
We recommend that each partnership, or company with multiple shareholders, should have a Shareholder Agreement or Partnership Agreement which provides a legally enforceable mechanism for resolving such disputes. We acknowledge that not every situation can be covered by such Agreements but the mechanism can be a strong incentive to reach a compromise. A typical example is the inclusion of a ‘Russian Roulette’ clause which provides for the compulsory exit of one or more shareholders (by selling shares to the remaining shareholders.)
If there is no such agreement then the parties will need assistance to achieve a compromise. In the first instance, we recommend mediation as a cost effective and timely method of achieving a settlement. If this fails the Courts can be asked to order the winding up of the company or the dissolution of the partnership.