Resolving Director Disputes and Navigating UK Company Law
The success of any company often depends on the effectiveness and collaboration of its directors. However, it is not uncommon for disputes to arise between them, which can have a significant impact on the company’s performance, governance, and overall stability. By collaborating with our specialized teams such as Corporate and Commercial, and Immigration, we can offer comprehensive guidance to directors, enabling them to tackle the diverse range of challenges that they might encounter.
Resolving director disputes is essential for maintaining the stability and performance of a company. By understanding the legal framework provided by UK company law and exploring the available options, directors can navigate these challenges and work towards a resolution that protects the interests of the company and its stakeholders. Early intervention and a willingness to engage in alternative dispute resolution methods can often help to resolve disputes more efficiently and amicably, ensuring the ongoing success of the company.
Our firm represents directors and businesses of all sizes, from small enterprises to public limited companies, and has expertise in handling various types of conflicts, such as:
- Claims involving breach of fiduciary duty, both for and against directors
- Disputes related to fraud, both for and against directors
- Conflicts of interest and director misfeasance claims
- Director dismissal and defending disqualification proceedings
- Earn out disagreements and restrictive covenant disputes
- Insolvency/winding up disputes between directors
- Deadlocked boards and activist shareholder issues
How our law firm can help
We specialise in handling director disputes and assisting clients through the complex process of resolving these issues. Our services include:
- Facilitating negotiation and mediation: At our firm, we understand that alternative dispute resolution can be a more efficient and cost-effective way to resolve disputes between parties. Our team is here to advise you on the best approach to your matter, including when and how to engage in negotiation and mediation, to minimize any potential impact on your company’s operations.
- Representing clients in litigation or arbitration: If necessary, our highly skilled legal team can represent you and your company in litigation or arbitration proceedings, providing you with the support and guidance you need to achieve a favourable outcome.
- Drafting and reviewing company agreements: To avoid future disputes, it’s crucial to have clear and concise company agreements in place. We can help you draft and review your company’s governing documents, such as shareholder agreements and articles of association, to ensure they meet your needs and provide a strong foundation for your company’s governance.
- Advising on corporate governance and compliance: Effective corporate governance is essential for preventing and resolving disputes between directors. Our approachable team can offer guidance on best practices for governance and compliance, helping you navigate the complexities of UK company law and minimize the risk of future disputes.
By offering a comprehensive range of services and leveraging our expertise in UK company law, we can help you navigate the challenges of director disputes and work towards a resolution that safeguards the ongoing success of your company.
- What happens when directors disagree on a decision?
When directors disagree, they should try to resolve the issue through open communication and negotiation. If they cannot reach a consensus, the company’s Articles of Association or bylaws may provide guidance on how to proceed. In some cases, involving an impartial third party, such as a mediator, may be helpful in finding a resolution.
- How can the board of directors remove a director?
Under the Companies Act 2006, specifically section 168, a director can be removed from office by an ordinary resolution of the shareholders, regardless of any provisions in the company’s Articles of Association, bylaws, or any agreement between the director and the company. Proper notice and the opportunity to be heard must be given.
- What fiduciary duties do directors have?
Under the Companies Act 2006, specifically sections 171-177, directors have a range of fiduciary duties, including the duty to act within their powers, the duty to promote the success of the company, the duty to exercise independent judgment, the duty to exercise reasonable care, skill and diligence, the duty to avoid conflicts of interest, the duty not to accept benefits from third parties, and the duty to declare an interest in a proposed transaction or arrangement.
- What are the consequences for a director in breach of their fiduciary duties?
Consequences for breaching fiduciary duties may include personal liability for any damages incurred by the company, potential disqualification from serving as a director under the Company Directors Disqualification Act 1986, and reputational damage. In some cases, a breach may also lead to legal action, fines, or even criminal charges, depending on the severity and nature of the breach.
- Am I personally liable for improper or fraudulent conduct by my fellow directors?
Generally, directors are not personally liable for the misconduct of their fellow directors. However, if a director knowingly participates in or approves such conduct, they may be held personally liable under the Companies Act 2006 or other relevant laws. Additionally, if a director fails to exercise their fiduciary duties, such as the duty of care, they may be held responsible for any resulting damages.
- As a director, what should I do if I feel that the board is acting improperly?
If you believe that the board is acting improperly, it is important to voice your concerns and document your objections. Consult the company’s Articles of Association, bylaws, or any other relevant legal documents, including the Companies Act 2006, to understand your rights and obligations as a director. If necessary, seek legal advice from a solicitor specializing in commercial disputes to help you navigate the situation and ensure that you fulfil your fiduciary duties.
The information in this blog is for general information purposes only and does not purport to be comprehensive or to provide legal advice. Whilst every effort is made to ensure the information and law is current as of the date of publication it should be stressed that, due to the passage of time, this does not necessarily reflect the present legal position. Connaught Law and authors accept no responsibility for loss that may arise from accessing or reliance on information contained in this blog. For formal advice on the current law please don’t hesitate to contact Connaught Law. Legal advice is only provided pursuant to a written agreement, identified as such, and signed by the client and by or on behalf of Connaught Law.
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