Don’t delay – Act today

16 June, 2010

If you are involved in a shareholders dispute there can be a temptation to do nothing and hope that it all blows over.  Sometimes this is just what happens and it is the right thing to do.  However, a failure to grasp the nettle can also have unfortunate consequences.  You might find that your shareholders rights have been significantly diminished by a delay in taking action. 

Unlike, for example, in a claim under contract, there are no statutory time limits for bringing a claim under s.994 of the Companies Act 2006.  This does not however mean that you can simply store up a dispute or grievance to deploy at a suitable moment.

First, there is real risk that the court will find that you have acquiesced in what has happened (in other words accepted the situation) and therefore no longer have the grounds to assert unfair prejudice.

Second, there is a more specific risk in relation to quasi-partnerships.  Delay in taking action may be taken as indicating an agreement that the quasi-partnership has come to an end.  This may mean that actions which would be unfair in a quasi-partnership company cease to become unfair.  Even if there is still unfairness it may affect the remedy that is available.  Typically in quasi-partnership situations no discount is made in valuing the shareholding to reflect that it is a minority shareholding.  This is not the case where there is no quasi-partnership and this can obviously have a significant impact on valuation.

What this does not mean is that you should rush to court at the first hint of a dispute.  The benefits of jaw over war are still paramount and the court will not penalise anybody for delay caused by attempts to resolve a dispute without recourse to litigation.

However, you should be aware of the dangers of delay and the fact that sometimes in relation to shareholders claims it is a case of use it or lose it.