Unfair Prejudice Petitions: Most Shareholder Disputes Start Years Before Anyone Goes to Court

Common Warning Signs 

Many unfair prejudice petitions arise from issues such as: 

• Exclusion from management. 

• Failure to provide company information. 

• Disputes over dividends. 

• Excessive director remuneration. 

• Ignoring agreed decision-making processes. 

• A shareholder feeling trapped in the business. 

These issues often develop gradually. One decision is tolerated. Then another. Eventually trust disappears. 

Unfair dismissal claims quite often depend on formal or informal understandings, made at the outset or developed over time.  If these are not identified and recorded in the right way, and reviewed from time to time, misunderstanding can arise. 

Fairness Requires Clarity

The best protection against unfairness is not litigation. It is clarity. 

When shareholders understand: 

• Their rights. 

• Their obligations. 

• How decisions are made. 

• How they can leave the business. 

many disputes may never emerge. 

If a shareholder knows what their own expectations are and communicates this in the right way to their co-shareholders, they are getting off on the right foot.  This may not prevent acts of prejudice if the majority decides for some reason to proceed in that way, but it could leave the aggrieved shareholder in a better position, if they need to resort to an unfair prejudice claim. 

The Framework

A surprising number of companies operate without: 

• A current Shareholders' Agreement. 

• Appropriate Articles of Association. 

• Defined decision-making rights. 

• Exit arrangements. 

When difficult issues arise, there may be no agreed framework for resolving them. The result is uncertainty, potential conflict and increasing legal risk.  These documents are sometimes seen as an unnecessary formality among close business colleagues. But circumstances can and will change over the life of any business.  Having a clear understanding which they can refer back, adjusted from time to time to keep up with the changing circumstances, can be very valuable in resolving issues before they turn into unfair prejudice claims.  

Shareholders agreements: frequently asked questions

What rights do shareholders actually have?

The answer depends on: 

• The Companies Act 2006. 

• The company's Articles of Association. 

• Any Shareholders' Agreement. 

• The terms attached to particular shares. 

Common rights may include: 

• Voting rights. 

• Dividend rights. 

• Rights to receive certain company information. 

• Rights to attend and vote at general meetings. 

• Rights relating to changes in the company's constitution. 

Many shareholders are surprised to discover that some rights they thought they possessed do not exist in their company's legal documents.  

What is the difference between the Articles of Association and a Shareholders Agreement?

The Articles of Association are the company's constitutional document and apply to all shareholders. 

A Shareholders Agreement is a contract between some or all of the shareholders and it can deal with matters that are not reflected in the Articles. As a private document between the shareholders, unlike the Articles, it is not available for inspection on the Companies House website. 

The two documents should complement one another and be reviewed together 

Why does my company need a Shareholders' Agreement?

A well-drafted Shareholders Agreement helps establish clear understandings and reduce the risk of future disputes. 

It can cover matters such as: 

• Decision-making powers. 

• Minority protections. 

• Director appointments. 

• Information rights. 

• Dividend policies. 

• Exit arrangements. 

• Deadlock resolution. 

Many unfair prejudice claims arise because these issues were never properly documented.

Next reads

• "It's My Company Too"... So Why Am I Being Ignored?

• Unfairness in Business: Five Things Every Company Should Do Now

Company Commercial law advice 

Our Company Commercial team advises businesses, directors and contractors across London on company and commercial matters, employment law and risk management. To discuss a review of your organisation's current position, call 020 8858 6971 or email michael.pope@grantsaw.co.uk or james.mckimm@grantsaw.co.uk. 

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Disclaimer 

This article is for general information only and is not legal advice. Laws and guidance change and outcomes depend on facts. If you need advice on your situation, please contact us. Grant Saw Solicitors LLP is authorised and regulated by the Solicitors Regulation Authority. 

Last updated: 30 September 2026