Unfairness in Business: Five Things Every Company Should Do Now

Fortunately, there is much that can be done before disputes arise.

1. Put a Proper Shareholders Agreement in Place 

A Shareholders Agreement creates certainty around rights, responsibilities and expectations.  Without one, shareholders frequently discover they have fewer protections than they assumed. 

2. Review the Company's Articles 

Many Articles are adopted when a company is incorporated and then forgotten. Years later they may no longer reflect how the business is actually run. 

3. Ensure Shareholders Understand Their Rights 

Disputes are often the result of misunderstandings about their rights and obligations. A good understanding of their own position and that of their co-shareholders can prevent unrealistic expectations and reduce the risk of a dispute. 

4. Clarify Who Makes Which Decisions 

One of the most common causes of tension is uncertainty over authority. Knowing whether a decision belongs to the directors or the shareholders can prevent significant disagreement.  Knowing how these decisions can and should be made in the right way is equally important.  

5. Plan for Exits Before They Are Needed 

Most shareholder disputes ultimately involve somebody wanting to leave but not having a practical mechanism for doing so. Effective exit planning provides options before relationships deteriorate. 

The Cost of Doing Nothing 

Shareholder disputes rarely emerge overnight. They develop slowly and often silently until a triggering event exposes underlying tensions. The businesses that navigate these challenges most successfully are usually those that put clear arrangements in place before problems arise. 

Litigation is not only expensive.  It can be very disruptive, both to the orderly management of the business and to the personal lives of those involved.  This should never be underestimated.  Having the right documents in place and keeping them up to date is a means of reducing the risk of a damaging dispute.  

A Shareholders' Toolkit 

An organised group of documents that can reduce the risk of problems between shareholders turning into an unfair prejudice claim is important for all businesses.  

They set out the legal framework for the relationship between the shareholders , clarify the understanding on which they agreed to work together and help advisers, if they are needed, to guide the parties to an outcome which resolves the situation, one way of the other.  

Shareholders agreements: frequently asked questions

Can the majority shareholders do whatever they want? 

The legal principle is 'majority rule'. But the majority cannot always do as they choose. 

Although majority shareholders may control voting outcomes, their actions remain subject to: 

• The Companies Act 2006. 

• Fiduciary duties of directors. 

• The company's constitution. 

• Shareholders' Agreements. 

• The law relating to unfair prejudice. 

Majority control does not give a licence to ignore the legitimate interests of others. 

What happens if shareholders fall out? 

The answer depends largely on the company's legal documents. 

Without appropriate protections there may be: 

• Deadlock. 

• Management disputes. 

• Difficulties selling shares. 

• Litigation in the form of an unfair prejudice petition brought to the High Court under section 994 Companies Act 2006 or other claims, including those to the Employment Tribunals. 

With proper planning, many disputes can be resolved through agreed exit routes or dispute resolution provisions. 

What happens if I cannot sell my shares? 

In private companies there is often no ready market for the shares. This can leave shareholders feeling trapped, particularly where relationships have deteriorated. 

Appropriate share transfer provisions, with share valuation provisions and buyout mechanisms can help avoid this situation considerably. 

Why is exit planning so important? 

Many shareholder disputes develop because one shareholder wants to leave but has no practical way of doing so. 

The shareholders may disagree on: 

• Share valuation. 

• Funding a buyout. 

• The future direction of the business. 

Exit planning establishes a roadmap before those issues arise.

Next reads

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

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

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