Falling out with a business partner is rarely just a legal problem. You built the company together, and now decisions are stuck, trust has gone, and the disagreement is starting to cost the business real money. For an established company with staff, customers and momentum, that is not something you can afford to leave to sort itself out.
Hendersons Legal acts for small and medium sized Victorian businesses in exactly these situations. We advise majority and minority shareholders, working with directors and family companies on how to resolve a dispute in a way that protects the value of the business, and, where the relationship can be saved, the working relationship too. Our focus is commercial. We look for the outcome that gets you back to running the company, or cleanly out of it, at a sensible cost.
What is a shareholder dispute?
A shareholder dispute is a disagreement between the owners of a company, or between shareholders and the directors, about how the company is run or how its value should be shared. In small and medium companies the shareholders are often also the directors and the people working in the business, so a dispute at ownership level quickly spills into day-to-day management. Left unresolved, it can stall decisions, unsettle staff and customers, and reduce the value of everything you have built.
Common causes of shareholder disputes
The disputes we are asked to resolve usually come down to a handful of recurring problems:
- A breakdown in the relationship between business partners, particularly where shareholders are also directors
- Disagreement over strategy, spending or the direction of the company
- One shareholder being shut out of management or decision-making
- How profits are shared, including no dividends while others draw high salaries
- Company money or opportunities being diverted, or related-party transactions that benefit one side
- Deadlock in a 50/50 company, where neither owner can carry a decision
- Disagreement over the value of shares when someone wants to buy in or exit
- Breach of a shareholders agreement, or the absence of one altogether
How we resolve shareholder disputes
Most shareholder disputes are best resolved without a courtroom, and a public fight between owners is usually expensive for everyone. We start by working out what you actually want, whether that is to stay and fix the governance, to buy out the other side, or to exit on fair terms. From there we work through the options in a sensible order, from a direct approach to the other shareholders, to mediation, and to formal proceedings only where they are needed.
Where agreement cannot be reached, we are ready to act. Our litigation team can bring or defend proceedings in the Supreme Court of Victoria, and you can read more about how we run disputes on our Court and Tribunal Representation page.
Shareholder oppression and your legal options
When a shareholder, usually a minority, is being treated unfairly, the Corporations Act 2001 (Cth) provides real remedies. Conduct in the company’s affairs that is oppressive, unfairly prejudicial or unfairly discriminatory can be challenged under section 232. If the court is satisfied, it has wide powers under section 233 to put things right, and the most common order is that one party buy out the other’s shares at a fair value set by the court.
Other options can also apply, depending on the situation. In serious cases a shareholder can ask the court to wind the company up on just and equitable grounds under section 461, and where a wrong has been done to the company itself, a shareholder may bring a statutory derivative action under section 236. We advise on which of these gives you the best position, and what each is likely to involve in time and cost.
Protecting your position with a shareholders agreement
Many of the disputes we see could have been avoided, or resolved far more cheaply, with a clear shareholders agreement. A good agreement sets out how major decisions are made, how a deadlock is broken, how shares are valued, and what happens when a shareholder wants to leave or the owners fall out.
We prepare and review shareholders agreements, buy-sell arrangements and company constitutions for Victorian businesses, and we can build in exit and deadlock mechanisms that keep a future dispute out of court. You can read more about our wider commercial work on our Business and Commercial page.
Who we act for
We act for both sides of shareholder disputes. Our clients are typically owner-run and family companies across Victoria, from established small businesses through to medium-sized companies with turnover up to around $100 million. We act for majority shareholders protecting a company they have built, for minority shareholders who are being shut out or short-changed, and for directors caught between their duties and a dispute among the owners. Whatever your position, you deal with an experienced lawyer who tells you plainly where you stand.
Why choose Hendersons Legal
Commercial judgment, not just legal advice
We have run businesses and advised them for more than twenty years, and we treat a shareholder dispute as a commercial problem with a legal solution. We keep the cost of the dispute measured against the value of the outcome, so a fight never ends up worth less than the peace.
Located in the court precinct
Our office is minutes from the Supreme Court of Victoria and the other major courts. When a matter needs someone there in person, we can be there at short notice.
Clear costs up front
We give you a cost estimate before we start, confirmed in a Costs Agreement, and we keep you updated on costs as your matter progresses. You will know where you stand from the beginning.
Frequently asked questions
What is shareholder oppression?
Shareholder oppression is conduct in a company’s affairs that is unfairly prejudicial to, or unfairly discriminatory against, one or more shareholders, usually a minority. Under section 232 of the Corporations Act, a shareholder affected by that conduct can ask the court for a remedy, which often includes ordering the other shareholders to buy their shares at a fair value.
I am a minority shareholder being shut out. What can I do?
You may have a claim for oppression even if you cannot control company decisions. Being locked out of management, denied information, or denied a fair share of profits can all support a claim under the Corporations Act. The first step is advice on your position, and we usually try to negotiate a fair exit or buyout before going to court.
Can I force the other shareholder to sell, or buy me out?
Sometimes. A buyout is the most common outcome of a successful oppression claim, and the court can order one side to buy the other’s shares at a value it sets. A well drafted shareholders agreement can also give a right to buy or sell in certain situations. We advise on which options apply to your company.
We do not have a shareholders agreement. Do we still have options?
Yes. Your rights come from the Corporations Act and the company’s constitution as well as any agreement, so you are not without options if there is no shareholders agreement. It can make a dispute harder to resolve, which is why we also help clients put clear agreements in place.
Speak to a shareholder dispute lawyer
If you are in dispute with a business partner, or you are worried about how you are being treated as a shareholder, the sooner you get advice the more options you have. Call (03) 9629 2211 or complete our online enquiry form, and one of our experienced lawyers will be in touch.
