AN EPIDEMIC OF DISSATISFACTION
The COVID-19 pandemic has caused people to look at their businesses and investments in a different way. There has been considerable frustration in the business world during the pandemic. Directors and managers have had difficult decisions to make, and the results have often not been to the liking of shareholders, many of whom, perhaps, have had unrealistic expectations about business performance in a world where markets in many sectors have shrunk radically, if not dried up entirely.
In some companies, this has exposed problems of which people previously were blissfully ignorant – sometimes because shareholders and investors have reassessed their priorities and taken the opportunity to consider their business interests from a new perspective; other times because the current global climate has highlighted hitherto hidden shortcomings of the business.
Not uncommonly, the tug of war between shareholder self-interest and director duties to the company have led to a breakdown in relationships, and consequently to shareholder disputes – whether between co-shareholders, or between shareholders and directors. Many such disputes are borne out of nothing more than a sense of unfairness, rather than any identifiable legal wrong. It is vital, therefore, that businesses and individuals alike deal with such disputes effectively, including in terms of time and cost, and, if possible, take steps to avoid dissatisfaction evolving into a dispute in the first place.
One key way to avoid shareholder disputes is to get ahead of any disagreement by recording fully and accurately the intended relationship between the parties. Shareholders’ agreements focus minds at the outset – when things are still rosy – and are a good opportunity for parties to properly consider what they want to achieve through the business relationship, the expectations of co-shareholders and the company itself, and what obligations each party is willing to assume and will fulfil.
Oct-Dec 2021 issue
McGuireWoods London LLP