Resolving Shareholder & Partnership Disputes

08.12.25

A dispute between shareholders of a limited company or between partners in a partnership can be an exhausting and time-consuming ordeal. It is often detrimental not only to the relationships between the parties involved but also to the success and performance of the business. While it is never a pleasant situation to find yourself in, with the correct legal advice and assistance, such matters can be resolved effectively.

In this article, we discuss some of the reasons why these disputes arise, the legal remedies available, and tips on how to avoid them.

Types of Disputes

Disputes between shareholders or partners can arise from a variety of circumstances. However, most disputes fall into the following categories:

Exclusion from decision-making activities
Profit or dividend distribution
Breaches of fiduciary duties

1. Exclusion from Decision-Making Activities

Depending on the structure of the business or partnership, members may be involved in decision-making activities. A member’s involvement largely depends on their voting rights, any shareholder/partnership agreements and the company’s articles of association.

These disputes often arise where there is an imbalance of power, such as a few majority shareholders dominating a group of minority shareholders.

Disputes regarding decision-making activities can be avoided by:

Having clear shareholder agreements
Holding regular shareholder meetings
Allowing shareholders to exercise their voting rights appropriately

Where a shareholder feels unfairly excluded, they may bring an unfair prejudice claim, commonly referred to as a Section 994 Petition, in reference to the relevant section of the Companies Act 2006. These actions are typically lengthy and costly and arise when a shareholder believes the value of their shareholding has been diminished due to the actions of others.

The usual remedy is for the other shareholders to be ordered to purchase the prejudiced shareholder’s shares at a ‘fair’ value — typically what the shares would have been worth had the prejudicial actions not occurred.

2. Profit or Dividend Distribution

The primary reason for becoming a shareholder or partner is to receive a share of the profits or dividends. However, disputes can arise over how profits are divided or dividends distributed. This is particularly common where:

There are different classes of shares
Decisions are made that affect the amount or method of distribution

These matters are usually governed by the company’s articles of association or the shareholder/partnership agreement. Disputes often stem from:

Lack of transparency
Unclear governing documents
Disagreements over whether profits should be distributed or reinvested

To avoid such disputes, it is important to:

Ensure the company has clear articles of association and shareholder/partnership agreements
Follow the terms of those agreements consistently

Legal remedies for disputes concerning profit or dividend distribution may include:

Payment of the dividend: Courts can order payment if it has been unfairly withheld
Damages: compensation for financial loss due to improper distribution
Section 994 Petitions

3. Breaches of Fiduciary Duties

A fiduciary is someone who has undertaken to act for and on behalf of another in circumstances which give rise to a relationship of trust and confidence.

It is well established that directors of a limited company owe fiduciary duties to the company and its shareholders, as codified in the Companies Act 2006. Similarly, partners owe fiduciary duties to one another. Key fiduciary duties include:

Duty to promote the success of the company
Duty of care and skill
Duty to avoid conflicts of interest
Duty to declare interests

Less commonly known is that shareholders may also owe fiduciary duties to one another in certain circumstances, particularly in small or family-run businesses where shareholders also act as directors.

To avoid breaches:

Act with integrity and honesty
Maintain clear structures for meetings
Promptly declare any conflicts of interest

Legal remedies for breaches include:

Injunctions: To prevent ongoing breaches, typically in urgent situations
Damages: Requiring the breaching party to account for profits made or losses caused

Conclusion

Many shareholder or partnership disputes can be avoided by:

Having clear Articles of Association
Drafting comprehensive shareholder or partnership agreements
Holding regular meetings to keep all parties informed
Understanding the rights and duties of individual shareholders or partners

At Wilson Nesbitt, our Corporate team can review your articles and agreements to identify any gaps or risks. Should you find yourself in a dispute, our experienced Dispute Resolution team can assist with negotiations or, if necessary, represent you in legal proceedings.

If you would like a confidential discussion with a member of our legal team, please call 028 9032 3864 or get in touch via our online form.