Category: Blog Post

What happened to our trust?

Andrew Marsden

If there’s one thing that sits at the very epicentre of your business relationship, it’s trust.

Whether you’ve just started a new venture with a friend or colleague or have been in business for years trust and good faith will be at the core of your relationship; it is what initially brings business relationships together and it is very much the glue that holds that relationship and the business together.

So, when the trust in a business relationship suddenly disappears or gradually breaks down, the impact can be far-reaching. For most it will be both demoralising and upsetting but for many it can be really devastating; especially when your business, finances or both are compromised as a result.

Consider potential fallouts before a dispute arises

Before you have to face such a situation there are things you can and should do to make life easier if the worst comes to the worst. Preparing for a future dispute is not the same as believing that your relationship will not last. Planning for any eventuality is prudent. No matter how long you have known your partner and how strong your business relationship is, disputes can and do happen. When they do, you want to be sure you have a strong and sensible shareholders’ agreement in place. That agreement should not only protect you from the consequences of fall out but also provide a practical means for achieving resolution.

Record your understanding and expectations in a written shareholders’ agreement

The best way to avoid any disagreements over who is responsible for what and how your business should be conducted is to set out your agreement, expectations and dispute resolution process right from the start. Instead of just agreeing this verbally, record it in clear written form and in a legally binding document so that everyone concerned knows the position from the outset and everyone has a written record that they can refer to when the need arises. A shareholders’ agreement is not a legal requirement but it will most certainly make things much simpler, clearer and more straightforward if you should face disagreement or dispute in due course. Indeed, an effective shareholders’ agreement will provide the framework for resolution. It is also relatively inexpensive and can save you a lot of money further down the line.

Consider mediation

If you already find yourself in dispute with your fellow director or shareholder then don’t immediately turn to litigation. Although when in the midst of a dispute it can be hard to see a way out, the chances are your dispute can be resolved without having to go to court. Mediation is a really effective way of achieving dispute resolution and is best conducted by an experienced and trained professional.

Seek legal advice as early as possible

You don’t have to wait until you are in the midst of a dispute to seek legal advice; in fact, the best way to protect yourself and your business from any fall out is to speak with a legal professional as early as possible. Indeed, while it may be the last thing on your mind when embarking on a new business venture, planning for the worst early on will always put you in a better position further down the line. It may even help to strengthen and cement your business relationships from the outset.

Issues arising from a lack of trust can be challenging to overcome. If this is a situation you have found yourself in rest assured that there are steps you can and should take in order to prevent damaging repercussions from that fall out, to protect your interests and to put yourself in a strong position from which to begin negotiating terms of resolution.

I offer an initial free thirty-minute discussion during which I can advise you on the best way forward for you so to find out more please do just get in touch.

Legal Surgery to get you the help you need with partnership and director disputes

Andrew Marsden

Shareholder and partnership disputes are never easy but they would certainly be a whole lot easier if you had an experienced, specialist barrister on hand to guide you through the process and answer questions you have as and when they are arise!

In reality this doesn’t happen too often. People only seek out a barrister’s help once they are very much in the midst of a dispute and often when legal proceedings feel like the only way out.

However, with the right advice, support and guidance most shareholder and partnership disputes can be resolved without the need for litigation or ever needing to go to court.

Free Online Legal Surgery

If you could do with some expert legal advice in this field then come along to the free online legal surgery that I will be hosting on September 29th from 4pm-5pm. This is your chance to pick the brains of an experienced, specialist barrister without incurring any fees; an opportunity that doesn’t come around very often!

I’ll be discussing a range of topics such as:

What should I do if I have been excluded from my company and its business?

Being excluded from business decisions and proceedings is a very common issue which often leads to frustration, anger, hurt and resentment.

How do I ensure I get a fair share of the profits from our company?

Disputes regularly arise when people feel they are not getting their fair share of the spoils from the hard work that they have put in.

Can I get access to our company’s accounts, books and records?

In a world where information is often key ensuring you have access to your company’s accounts, books and records can be critical.

How do I go about removing a fellow director/shareholder who has acted wrongly?

If you feel you do have to get rid of your business partner it is essential that you should understand whether you can do so and how you should go about doing so; otherwise it can certainly land you in “hot water”!

How do I deal with a fellow director/shareholder who is moonlighting?

When someone tries to take joint business opportunities for themselves rather than sharing them you need to know how to respond to protect your interests.

If you would like to take part in my free legal surgery, just go to Eventbrite link below that’s best for you and register your space:

>>For the Solicitors Legal Surgery<<

>>For the Business Owners / Stakeholders<<

 

He’s exploiting business opportunities for himself rather than us!

Andrew Marsden

Have you ever been in the position where you’ve discovered your business partner is ‘moonlighting’ behind your back? It’s not an easy place to come back from – trust is lost, reputations damaged and it can be the beginning of the end for many business relationships.

If this resonates with you, you’re not alone; it’s actually a fairly common occurrence and something I see a lot of in my day to day work.

While it can be a really painful, frustrating and unsettling situation to find yourself in, there is hope; usually even the most acrimonious of situations can be resolved with the benefit of specialist and experienced advice and support.

Of course, with emotions running high it can be very difficult to see a clear path and even knowing where to start can be overwhelming. So, what are your options?

1. Enlist the help of a an experienced specialist

When you’re embroiled in a feud with a business partner – particularly one that is fuelled by strong emotion – don’t try to battle it out on your own or with inexperienced or non specialist legal advice. This very rarely works out for the best! Disputes can quickly deepen and the greater the conflict between two parties, the less chance there is of resolving differences and enabling both sides to walk away amicably or at least satisfied. Right from the start, get the best advice you can. The best source of such advice is often an experienced, specialist barrister. They will be able to advise you on the best and most effective path to take. You can do so under the Bar Council’s Direct Access scheme without having to engage a solicitor and so substantially reduce the costs involved.  In doing so, you will no doubt save yourself a lot of time, stress, worry and, potentially, money.

2. Check the terms of your company’s articles of association and any shareholder’s agreement or your partnership/LLP agreement

The terms of your articles of association, shareholders agreement, partnership or LLP agreement can be incredibly effective in providing routes to resolution of disputes. If they have been carefully drawn up they should provide mechanisms for resolving disputes cheaply, effectively, efficiently and with the least possible damage to your underlying business and its value to you. I always recommend having such agreements in place from the outset. If you haven’t got such agreements in place, do not delay. Get them put in place as soon as possible and well before any dispute arises. Again, speaking with an experienced, specialist barrister will ensure you are protected should the worse come to the worse.

3. Use effective negotiation and mediation to try and resolve any dispute and avoid litigation

More often than not properly prepared for and conducted negotiation or mediation should be capable of resolving disputes without resort having to be had to any actual litigation; even where things might seem beyond repair. I always try to ensure that sensible and fair compromise is reached with both parties being able to walk away satisfied even if relationships might not always remain fully intact. Litigation should really be considered the last resort.

4. If legal action is required then go ahead and take it!

If a dispute cannot be resolved without it then don’t be afraid to turn to litigation. For example, the courts have power under section 994 of the Companies Act 2006 to grant relief where the affairs of a company are being conducted in a manner unfairly prejudicial to some of its shareholders and, where it is appropriate to do so, you should use it. But just make sure you use it when its right to do so, that it doesn’t come back to bite you and that you don’t end up regretting it. Again, turn to an experienced and specialist barrister. When my clients instruct me under the Bar Council’s Direct Access scheme they are often surprised by how effective it is and how reasonable the legal fees are compared with using a solicitor. Certainly, a good barrister should ensure you are well informed, well prepared, confident in any litigation and be transparent about the costs involved. And remember, never be afraid to ask questions; if anything is unclear or simply doesn’t feel right then demand an explanation.

Finding yourself in the midst of a business dispute is never fun or easy; particularly if there are feelings of resentment and ‘wrongdoing’ involved. Don’t try and fight your way through by yourself – even if you are not sure whether action is needed or just want to find out what your options are, please do get in touch with me. I offer a free thirty minute initial consultation and I’m sure I can give you have some helpful guidance as to the best way forward.

Business structures – what’s best for me?

Andrew Marsden

When it comes to business structures, there really isn’t ‘one size fits all’.

It also isn’t a decision you should make in haste; choosing the right business structure can be pivotal as it will determine what responsibilities, liabilities and options you have in the running of your business.

It will also dictate what paperwork you need in order to protect your interests; particularly if you are going into business with other people. Though the unravelling of a relationship may be the last thing on your mind when setting up your business it is a really crucial aspect that needs to be considered right from the outset!

The path to resolving any dispute that might arise in the future will depend upon the type of business structure you have decided to use and so its important that you have chose the business structure that is right for you.

Sole Traders

The simplest of all structures, sole trader businesses are owned and operated by a single person. They can be appealing to a new business owner as they are easy to set up, involve minimal paperwork and require fewer start-up costs.

All profits made and assets owned belong entirely to the individual concerned; so an agreement on how profits and assets should be divided isn’t needed. Likewise, there is no need to spell out responsibilities as they all fall on the shoulders of that one individual.

This simplicity comes with a couple of significant drawbacks. First, it’s not possible to operate as a sole trader if you want to go into business with other people. Secondly, the sole trader is personally liable on any business dealings and will personally have to meet any debts incurred and bear any losses that the business might suffer.

What I would just say in passing is that, with all responsibilities falling personally on the sole trader, it is generally advisable to make sure insurance policies and lasting powers of attorney are in place in case the worse happens.

In practice, businesses often start out as sole traders but transition to another structure as the business begins to scale up.

Partnerships

Partnership is one option if you want to join forces with other individuals and enjoy shared ideas, talents, responsibilities, risks and rewards of running a business together.

Operating in this way can give more flexibility. Partners can come and go as the business develops and changes and you can divide out profits as you want. However, if a partner incurs any contractual debt in the course of the business all other partners are held equally accountable.

Financial and management issues are two of the most common causes of dispute between partners so if you decide to operate under a partnership it is crucial you draw up a partnership agreement at the very beginning to govern how profits, ownership and management are to be split.

Being in business with other people presents the risk of disagreements over how the business should be run. Laying out these terms in a legally binding partnership agreement and discussing all elements from the start will put you in a much better position if you are to encounter a fallout later down the line.

Limited Companies

A limited company is a separate legal entity from its shareholders – it holds its own assets and contracts entered into on behalf of the company are generally its own responsibility rather than that of its shareholders or directors. There is less personal financial risk as liability is limited to the amount each shareholder has invested into the company.

There is often a fiscal and an administrative cost in running a business through a limited liability company but the advantages offers by limited liability status generally far outweight those costs

All limited companies in the UK must have articles of association – a constitutional public document that defines the basic rules and regulations of how the company is run and operates as a contract between the company and its shareholders. In addition, I always advise my clients to consider putting a shareholders’ agreement in place too. Unlike articles of association, a shareholder’s agreement is not a public document but a private contract instrumental in regulating the rights, responsibilities and duties of the shareholders.

If and when disputes occur, they are generally far simpler, quicker and cheaper to resolve if a shareholders’ agreement is already in place which should provide suitable mechanisms for resolution of such disputes.

If your business is based around high risk products or services then a limited liability company can provide personal protection from or a sort of insurance against these risks which may help with peace of mind.

Limited Liability Partnerships

Last but not least, you might want to consider operating through an LLP. Many professional services businesses choose to do so and for good reason. Like the shareholders in a limited company; the personal liability of the members of an LLP is limited to the amount each member has invested into the LLP. Again, as is the case with limited companies, stakes in the business can be transferred relatively easily and profits can be divided between the partners as they decide. The difference really is as regards the degree of public scrutiny which is less for LLP’s than it is for limited companies.

When forming a limited liability partnership, again make sure you have a carefully drafted LLP Agreement in place to help govern things such as how decisions are to be made, who has what responsibilities, how profits should be split, how members can be appointed, retire or leave and how any disputes that might arise are to be resolved without damaging the underlying business.

At the end of the day, choosing the best structure for your business really comes down to your own specific circumstances, desires and your ambitions as to how you want your business to be run. No matter which business structure you choose, the most important thing is to have the right legal paperwork in place from the outset so that you – as the owner, partner, shareholder or member – are protected and your assets safeguarded.

To discuss this in more detail please do get in touch – I’d be very happy to have an initial conversation with you completely fee-free.

Is a shareholder’s agreement worth the paper it’s written on?

Andrew Marsden

There’s a lot to think about when you’re entering into a new business with someone; be it a family member, friend or colleague.

There are new suppliers to forge relationships with, contracts to handle, office premises to organise, policies to get in place…the list goes on!

Amongst all the excitement and pressure the idea of adding any additional paperwork to the workload can be overwhelming which means that, all too often, putting a sensible and effective shareholders’ agreement in place slips down the list of priorities.

This can have severe consequences further down the line.  Disagreements between those in business together, though never planned, are common. It is essential that you have a shareholders’ agreement in place that protects your interests and provides mechanisms for effective and economic resolution of any future conflicts in ways that avoid unnecessary disruption and damage to your underlying business.

How do you know if your shareholders’ agreement is up to scratch?

Having spent nearly thirty years in the legal profession I have seen many shareholders’ agreements and it is fair to say that not all of them are of the same standard. Regretfully, many are simply are not fit for purpose and this can have dire outcomes for those shareholders that only discover their agreement doesn’t do its job once they find themselves in the middle of a dispute.

So, what can be done about this? Well, your shareholders’ agreement should be drawn up properly and comprehensively by an experienced lawyer with the specialist expertise needed to advise on the provisions required to make it effective in practice. Your shareholders’ agreement ought to be specifically tailored to your particular business and to the relationship that you intend to have with those you are going into business with. At the very least, it should include the following key elements:

  • It should protect the interests of all parties – so a good shareholders’ agreement will regulate the relationship between the shareholders, the issue, sale or transfer of shares, the setting of salaries and bonuses, how profits are to be distributed and how the business is conducted and the company is run.
  • It should include appropriate rights of veto – these help to protect the position of minority shareholders ensuring that majority shareholders cannot simply freeze them out of the business or take decisions on their own that might severely affect the rights or interests of others.
  • It should allow access to information – provision should be made within the agreement for access to all required accounts, records, documents and other data that might be needed in order for shareholders to make fully informed decisions.
  • It should enable participation in the business – a good shareholders’ agreement will secure for shareholders appropriate rights to participate in the business even in times of dispute and will help define how important decisions are to be made in the event of a fallout.
  • It should provide mechanisms for the effective resolution of future disputes – these can involve provisions requiring disputes to be referred for mediation or resolved by an arbitrator rather than by the courts which may prove considerably cheaper. Other effective resolution mechanisms might include appropriate “put/call” options or “good/bad leaver” provisions.

The truth is, without an effective agreement in place, shareholders are left vulnerable and their position and interests in the company are at risk. I would always advise establishing a shareholders’ agreement from the outset when entering into a new business with another person. But, even if you haven’t had such an agreement in place from the beginning, it is never too late. An appropriate and effective shareholders’ agreement agreement can be drawn up and entered into at any stage. But, be warned, it is very much easier to get its terms agreed before you find yourself facing disagreement or conflict. Otherwise, if you don’t have one in place, you may well be looking at expensive litigation to secure shareholder protection, avoid unfairly prejudicial conduct of your company’s affairs and secure resolution of shareholder disputes.

To ensure that your shareholders’ agreement is worth the paper it’s written on consider engaging an experienced, specialist barrister to draw one up for you. You can do so cost efficiently and without having to get solicitors involved too under the Bar Council’s Direct Public Access scheme.

Do not try and cut corners

If your shareholders’ agreement doesn’t cover everything you need it to then you will be leaving yourself open to unnecessary risks and potentially painful “commercial divorce” in the future. A comprehensive shareholder’s agreement will put your mind at rest, protect your rights and interests and allow you all to get on with business.

For more information or to discuss in further detail what provisions you may need to include in your own shareholders’ agreement, please do get in touch for an initial, no-fee conversation.

Time to go our separate ways – The Do’s and Don’ts of commercial divorce

Andrew Marsden

For some, it may be a long time in coming, For others, it can arise quickly and even entirely out of the blue. But many people in business do, at some point, have to face the question:

“Is it time to go our separate ways?”

Differences in opinion are bound to happen. Clashes of personality occur. One person may become overly self-motivated or greedy. You may feel a degree of exclusion. There may even be dishonesty involved. Whatever the reason; rifts are inevitably going to be felt every now and again. Nine times out of ten, arguments will get resolved quickly. Both parties forget and move on. In other cases, reconciliation may not be so easy.

Sometimes, relationships are strained to the point that they become irreparable.  If this is the situation you find yourself in don’t act impulsively or reactively. Take the time to consider the best course for you. Identify the measures that you need to take to protect the business and your interests in it. If you fail to do so you may find your dispute drags on, the business suffers and all you do is incur costs without making any real progress in finding a way forward out of the situation you find yourself in. On the other hand, with the right advice, planning and assistance in the implementation of that plan you might well find that the situation is resolved quickly, efficiently and cost-effectively.

Do: Enlist the best legal advice you can get as soon as you can. ‘Commercial divorce’ is complex and it’s important you are guided by an experienced specialist. You need a person who really knows the “in’s” and “out’s” in this area. You want advice from someone who not only fully understands the law and the litigation process but is also a master of all the other tools available to help resolve the position. All too often people delay seeking advice or turn to the wrong people and this can really backfire further down the line. The best course may well be to engage a specialist barrister from the start. You can now do this directly, going straight to a barrister and cutting out the “middleman”. This can ensure continuity throughout the process and it is surprisingly cost-effective too.

Don’t: Panic or let emotion get the better of you. If you’ve been personally impacted by a business relationship fall-out there are likely to be a lot of emotions involved. In the heat of the moment it can be difficult to determine between what feels right for you right now and what’s right for the business and for you and your interests in the longer term. Try to resist knee-jerk reactions. Approach the matter as calmly and as pragmatically as possible.

Do: Check what provisions you have in place in any constitutional documents. They might offer a route to resolution. You are likely to have such agreements between you whether in the form of a shareholders’ agreement, articles of association or a partnership agreement. If properly prepared those documents should define responsibilities, assist in the smooth running of the business and include appropriate dispute resolution mechanisms. If not speak to your barrister and get them in place now before tensions rise and resolving issues becomes much more difficult.

Don’t: Assume you’ll need to go to court. Most disputes can be resolved without the need to issue any legal proceedings at all. Litigation really is the last resort. It can be costly and drawn out. Most “commercial divorces” can be settled out of court through negotiation; often via mediation. Even if your business relationship seems beyond repair, an experienced and specialist barrister can help to re-open those communication channels.

Do: Ask questions throughout. Most people that require legal help won’t have been involved in the process before. It’s completely understandable that you should have questions and concerns. Raise them all, at any stage and your barrister should be able to explain matters to you and bring you both clarity and confidence. Take a look at the infographic that Andrew Marsden has prepared which explains and simplifies the whole process: [insert link to infographic on website]. Make sure you have complete faith in the person advising you and avoid finding yourself in a position you would rather not be in.

Don’t: Be afraid to ask about costs. There is no reason why unexpected fees or hidden costs should arise. Choose a barrister who is transparent and upfront about costs from the outset. Engaging a barrister direct is often the most cost-effective way of obtaining resolution and a way forward in what can feel like an intractable situation. Consider using the Bar Council’s Direct Public Access scheme to take advice directly from a specialist barrister from the outset: [insert link to DPA page on website]. You might also even find it is more affordable than you anticipated it might be!

If you are in the midst of a shareholder or partnership dispute and would like some guidance on how best to resolve it, feel free to get in touch with me for a confidential no-fee initial consultation.

Going into business with another person – Andrew Marsden’s “Top Practical Tips”

Andrew Marsden

There’s no denying it, going into business with other people can really pay off. It can offer up many benefits including a sharing of pressures and responsibilities, the opportunity to pool resources and the chance to combine skills, experience and talent. Doing so can really raise the bar beyond that which might be achieved through a solo venture. But going into business with others certainly does come with its own set of challenges.

While many relationships are born quickly from shared passions and enthusiasm for a business idea, far fewer are able to stand the test of time. I specialise in resolving disputes between those in business together who have fallen out for one reason or another. Very often things aren’t helped by the fact that solid foundations have not been set to meet the challenges that working together can entail.

So, before you dive into a new business relationship, first make sure you’ve got the fundamentals in place.  Trade through a limited company or a limited liability partnership. Ensure you have suitable articles of association and a sensible shareholders’ or members’ agreement. Make sure your understanding as to respective rights of participation in and management and conduct of the business are recorded. Make provision for access to all books, records, accounts and other information that might be required. Agree salary entitlements and dividend policies. Consider the merits of “good/bad leaver” provisions and “put/call” and “follow me” options. Formalise an effective and efficient process for dispute resolution. Strategise for exits and settle the basis and method of any future valuations of interests.

Moving forward, here are my “Top Practical Tips” which might help avoid disputes or at least enable you to resolve matter before things really start to turn sour.

  • Prepare a business plan, implement it and keep it under review: acting on an impulse may sound attractive but it is a risky strategy. Plan everything, implement your plan and then keep your plan under review.
  • Agree on goals and expectations: This is key to establishing a strong foundation for your business relationship from day one. Take time to consider your shared goals, aspirations and expectations and make sure you have these in writing.
  • Put boundaries and ground rules in place: When bad habits form precedents are often set. It can be really difficult to re-trace your footsteps and unpick things you’re unhappy with. Set boundaries and ground rules from the start so that everyone is clear on expected conduct and working relationships; disputes often arise when uncertain boundaries are overstepped.
  • Consider and play to each other’s strengths and weaknesses: If you’re forming a business relationship with another person the chances are you are both bringing different things to the table. Consider these strengths and weaknesses and build your business plan around them. A mutual respect for each other’s varied talents allows less chance of friction, competition and resentment.
  • Remain honest and transparent: Most disputes involve one person doing something behind another’s back. It may involve taking money from the business account, the diversion of a business opportunity or simply the making of business decisions without reference to relevant and interested parties. If you remain honest and transparent throughout it will limit the risk of conflict.
  • Keep communication open: As communication breaks down things are likely to go downhill very quickly. Even if your conflict has already escalated and you are no longer talking, legal professionals can act as advisers or even mediators to help re-open communication channels and enable sensible negotiations to be resumed and resolutions to be achieved.
  • Keep personal and business relation separate: this doesn’t mean that you shouldn’t go into business with a friend, family member or partner – many very successful business relationships are forged in this way. But, be careful about how you balance your personal and business relationships and keep clear boundaries in place. Your working relationship should be grounded in business and treated as such.

For further advice as to how to structure a business relationship, how to resolve a business dispute or more practical tips, feel free to get in touch with me for an initial, confidential 30 minute chat. Its entirely free – there’s no-obligation and no charge!

I think I’m being cheated on by a fellow director

Andrew Marsden

Have you ever had an uneasy feeling at work that something isn’t quite right?

Perhaps you have discovered that an unexplained sum of money has been leaving your company accounts on the same day each month.

Or it might be that you have been increasingly aware of conversations going on and decisions being made behind your back.

For any director of a company that will be a hard pill to swallow. It can be both hurtful and demoralising to think that your working relationship isn’t as strong as it once was. Of course, it’s not only the shareholder relationship that will suffer; your business could be impacted quite significantly too!

The good news is a route to resolution can generally be found even in the most strained of circumstances. The success of this resolution will largely come down to what steps you take in the wake of the fallout and who you engage to assist with it.

Dealing with a fallout

When you’ve had someone cheat on you behind your back – whether that’s in work or in a personal relationship – there are generally two ways to move forward.

The first is to get emotional and upset and try to make the wrongdoer “pay” or to try to get “even”.

The other is to think logically and practically; taking a far more proactive approach. This will almost always offer a more favourable conclusion in the long term.

It can be very easy in the first instance to let emotion take over and lead your actions. It’s understandable, particularly when someone close to you has breached your trust. However, it’s important that this doesn’t cloud your judgement or impact negatively on your chances of resolving the dispute on the best terms available and so that everyone can walk away amicably or, at the very least, satisfied with the outcome.

What outcome are you looking for?

This is the key question to ask yourself when you are in the midst of a conflict with a fellow shareholder. Getting “even” may be the tempting option but is it really the goal here? Take time to sit down and reflect on what outcome would be best for you in this situation.

Do you want to buy out your fellow shareholder from the business and have them cease to be a director?

Do you wish for yourself to be able to walk away from the business in exchange for a fair value for your shares?

Having a clear goal will help define your route to resolution and the best steps to take to achieve it. A specialist barrister should be able to talk you through the process and advise on what, realistically, is achievable.

In my experience often the most straightforward, efficient and cost-effective way to resolve disputes is to have one shareholder leave the company receiving a fair price for their shares. That being said, it has to be done in the right way; simply excluding a shareholder or director from the business can be potentially damaging.

This is not to say it isn’t an option, but a barrister experienced in these disputes should be able to clearly lay out the options for you and to explain what is involved at every stage of the process. Ultimately, they should help to ensure you are in the best possible place to make an informed decision on what is right for your situation.

The path to resolution

  • Having the right paperwork in place: If you already have a shareholders’ agreement in place this will likely include provisions that can be used to help reach resolution. For example, a shareholders’ agreement might contain terms that permit you to force a shareholder to sell their shares. Again, care needs to be taken in enforcing such provisions and a barrister with specialist experience can help you iron this detail out. If you don’t have a suitable shareholders’ agreement then it is certainly worth one put in place before any conflict or dispute arises. Even if you have no shareholders’ agreement in place you will have articles of association the terms of which might also assist in finding the appropriate way forward.
  • Access to specialist legal advice: Getting advice early on about your legal rights is the best way to ensure that disputes don’t escalate and that the path to resolution is as straightforward and pain-free as it can be. It is generally preferable to resolve disputes by using negotiation strategies or through engaging in mediation where possible. Again, your barrister can assist with this; trying always to ensure that sensible compromises are achieved while keeping relationships as intact and as amicable as possible. Of course, if things can’t be resolved via mediation, litigation through the courts may have to be considered as a final resort. Rest assured that if this is the route you end up taking, the right barrister will provide support throughout the process and keep costs transparent so that you enter into proceedings well prepared and confident.

For the majority, this will be the first time you might have faced a shareholder dispute within your business. If this is the case, you will no doubt have many questions and concerns as to what to expect from the process.

Please do get in touch if you would like some more information, or would like to discuss your own specific circumstances. An initial thirty minute consultation is free and I’d be very happy to advise on you as to the best steps to take.

Falling out with fellow shareholders, directors or partners – what next?

Andrew Marsden

It’s a scenario you probably never anticipated. When business relationships start out it can be difficult to envisage things ever turning sour. Why would you expect and plan for the worst to happen? The start of a new business venture is an exciting and motivating time. More often than not business relationships are forged out of a passion and a shared vision of what can be achieved.

Unfortunately, things don’t always stay that way.

Once the ‘honeymoon period’ is over it’s quite common for cracks to start to appear. For some these can be filled or at least papered over with little long term impact but for others those cracks start to deepen. When that occurs, it can have serious consequence for you and your business.

Shareholders, directors and partners fall out for a multitude of reasons. Typically, these might involve the diversion of business opportunities or the misappropriation of funds or assets. Perhaps someone has been caught with their “fingers in the till”. Sometimes one person may feel they are being excluded or left out of business decisions. Such scenarios feel unfair and prejudicial. Though the cause of the relationship breakdown may differ from case to case, the route to resolution is what’s important here; and there are several key stages to getting there.

Do you have a shareholders’ agreement already in place?

I always recommend those involved in business together ensure that they have a properly prepared shareholders’ or partnership agreement in place from the outset.  It will help to define shareholder or partner responsibilities, assist in the smooth running of the business and provide a mechanism for effective resolution of any disputes that might arise. Perhaps even more importantly, the presence of a decent shareholders’ or partnership agreement can actually help reduce the chances of future conflict.

It may now seem like a far and distant memory but, when you first entered into your business relationship, did you actually enter into a shareholders’ or partnership agreement. Perhaps you were keen to have an agreement in place from the outset. You may have had one drawn up on a recommendation. You might simply have had one prepared because it felt like the right thing to do.

If so, it is really important to familiarise yourself with its contents. It’s crucial you understand the details of any agreement that you have entered into and how it might affect or provide a route to resolution of any dispute you might find yourself in.

Take legal advice early on

Engaging a specialist and experienced barrister might well be the cheapest and best way of ensuring that the route to resolution is as seamless and stress-free as possible.

A specialist and experienced barrister will be able to identify any provisions in a shareholders’ or partnership agreement (including any concerning the exit of a participant) that might assist you. Your barrister will be able to give you a clear understanding of what impact they may have and advise on the next steps to take to achieve resolution.

What might those next steps look like?

Commonly a shareholders’ or partnership agreement will include provisions that can be used to resolve such disputes or will, at least, set out procedures for doing so.

Typically these might require one shareholder to sell their shares, cease to be a director and leave the company. But the process of removing a shareholder/director from the business can be complex and great care is required to avoid it backfiring. Again, a specialist barrister will be able to advise as to the options available and the procedures to be followed.

While complications can arise, having one shareholder walk away from the business receiving a fair value for his interest can often be the most straightforward solution. Indeed, in my experience, shareholder disputes can often be resolved in this way quickly, at limited cost and in a way that minimises disruption and damage to the business.

What if there is no agreement in place?

A surprising number of businesses don’t have any shareholders’ or partnership agreement in place. If you are in that position, all is certainly not lost.

Again seek early specialist advice from someone experienced in the resolution of these disputes who can guide and navigate you through the process towards resolution.

Initially you will need to consider negotiation or mediation as strategies to try to achieve workable compromises while keeping relationships as amicable as possible. Your barrister should advise you on the best approach to take and what you might realistically hope to achieve in your particular circumstances. It is nearly always preferable, from time, money and minimal business disruption perspectives, to achieve resolution in this way rather than through the courts.

In other case litigation may be inevitable. It may be the only way to achieve resolution. It may provide the catalyst that gets everyone talking sensibly. Generally, this begins with pre-action correspondence which may itself lead to resolution early on. If not, it may be necessary actually to issue proceedings and follow the litigation process which involves an exchange of statements of case, disclosure of documentary evidence, the provision of witness statements and expert evidence and, eventually, if necessary, a trial and a determination by a judge. However, it’s important to be aware that settlement can be achieved at any time during this process and very few cases actually go so far as reaching a trial and a determination by a judge.

Once again, you should turn to a specialist and experienced barrister who will work with you throughout the entire process from start to finish and ensure that, shareholder or partnership agreement in place or not, your dispute is resolved as amicably, on the best terms, as cost-effectively and as efficiently as possible.

To find out more, please get in touch by calling me on 07718 883094 or emailing andrew.marsden@commercialchambers.org. A thirty minute initial conversation won’t cost you anything and I’d be very happy to talk you through the options available and to advise on the best route to take.

Working with Andrew Marsden to resolve your business dispute

Andrew Marsden

There’s no two ways around it, when business relationships start to break down challenging times lie ahead. If you are to resolve matters it is critical that you get experienced specialist legal advice from the outset.

Explaining the dispute resolution process in a nutshell

For the majority, taking the first steps to dispute resolution can be the hardest part of the process. I have spent many years working with clients navigating difficult shareholder or partnership disputes and I know that, all too often, those involved delay taking or turn to the wrong people for advice and live to regret it.

Dispute resolution and the legal process can be confusing. It may well be the first time you have faced something of this sort. To help I have prepared an “infographic” which seeks to explain what’s involved. You can get a copy here.

Instructing a barrister directly

You might also be surprised to know that you can engage a barrister directly instead of going through a solicitor. What does this mean for you? Well, it can streamline process, gives you immediate access to specialist expert advice and will often save you substantial costs!

What you can expect from Andrew Marsden

You may not be familiar with working with a barrister – it may even seem intimidating. That is why I have also prepared an outline of exactly what you can expect when working with me. You can obtain a copy here.

Establishing an effective working relationship

Every client I work with and the situation that they face is unique. But, what they all want is a practical and commercial solution that works for them. A collaborative working relationship is essential to achieving this. It is very much a two-way process. The service I provide must work for you. To achieve this I welcome open dialogue, regular review and feedback. When you engage a barrister to resolve your shareholder or partnership dispute it’s essential that you establish a good working relationship with clear lines of communication from the outset.

Cost savings and other benefits in going directly to a barrister

How much will it cost? Here complete transparency is key. There is no excuse for unexpected fees or hidden costs. It is imperative to be clear, open and straightforward. I agree all fees in advance so that there are no surprise charges and I bill regularly so you know where you are. Indeed, if your lawyer is unclear about the costs involved this should be a “red flag”.

Unknown to many, it is very often cheaper to engage a barrister directly rather than going through a solicitor. Solicitor’s firms generally face large overheads and those inevitably get passed down to you the client.

There are also other savings to consider. Going directly to a barrister can avoid significant delays. It reduces the chain of communication. Fundamentally, if you have a strong position you will know this quickly and can act accordingly. On the other hand, if your position is weak you can save yourself a great deal of time, trouble and money.

Engaging a specialist barrister from the very outset not only provides you with direct access to specialist advice but also ensures you avoid steps that might compromise the strength of your position further down the line. I will provide you with a clear “road map to resolution” on the best commercial terms possible.

Free 30 minute consultation

So how do you start the process to resolution? I offer a free 30 minute phone consultation. You will probably have a host of questions and I should be able to answer many of them for you immediately. So, if you’re facing a breakdown in your business relations, if your embroiled in a shareholder or partnership dispute or if your fellow directors/shareholders or partners are behaving in an unfair or prejudicial way please get in touch – an initial conversation won’t cost you anything so you’ve nothing to lose!