In part 2 of this series, we considered the different measures you may wish to take in response to a company management disputes. This article, being part 3, explores what remedies may be available to you.

What remedies can you seek?

Depending on what has happened, there are a number of remedies which may be available to you.

Financial damages

Depending on whether a director has breached their duties under the Companies Act 2006 (CA 2006), and what duties were breached specifically, you may be entitled to monetary damages if their conduct has resulted in a loss of profits for the company. The amount of these damages will be granted at the court’s discretion and you must prove that the conduct of the director has directly caused a loss for the company.

Injunctions

If deemed appropriate, the court may order an injunction against a director or the company itself, either requiring something to be done or preventing certain actions.

It is important to consider that if you bring a claim against a fellow shareholder or director, whether it be for a financial remedy or an injunction, you risk the breakdown of your working relationship with the offending individual. Therefore, restrictive remedies may not be the most appropriate if you would like to maintain your rapport with the director in question.

Regulatory action by the court

This may appear to be quite an extreme reaction, but if the court deems fit, they have the power under s996(2) CA 2006 to regulate the future conduct of the company in response to an unfair prejudice petition. This could simply involve ordering a general meeting to be held, or could go as far as to prohibit alterations to the company’s articles of association without the court’s prior express permission.

Removing a director

Before forcefully removing a director, it may be worth considering if the director in question is ready to resign from the company. Resignation is often a more amicable option in comparison to the forced removal of a director and can also be a lot less costly.

If resignation is not an option, and you see no way for the dispute to be settled amicably, you may wish to consider removing the director from their position. You should first check your company’s governing document to see if there are any pre-determined events which result in the automatic dismissal of a director.

If the company’s governing documents are silent on the removal of directors, shareholders also have the power to remove a director under s168 CA 2006. The shareholders must serve prior notice on the company that they intend to pass a resolution to remove a director. It is important to note that the director in question has the right to make representations in response to their proposed removal. Once these representations have been considered, a simple majority vote at the general meeting will result in the removal of the director.

Alternatively, the court may order a director’s dismissal if they have breached their duties under CA 2006 and it is decided that the director is no longer fit to manage the company’s affairs.

Buy-back

Under s996(2) CA 2006, in response to an unfair prejudice petition, the court also has the power to order the purchase of a members’ shares by other shareholders of the company. The court can also order the company itself to buyback the shares from the offending shareholder, thus reducing the company’s capital.

Winding up the company

In rare situations where it is difficult for a resolution to be reached, the last resort for the company may be to present a winding up petition to the court on ‘just and equitable grounds’. This involves petitioning the court to assess the status of the company and decide whether voluntary liquidation of the company is the only viable choice. Again, this is a very rare remedy and should only be considered if all negotiations have failed and there are no other appropriate remedies.

If you are in a disagreement with another company director or shareholder or are concerned that anything in this article affects you then the Geldards’ Commercial Disputes Resolution team will be happy to assist and guide you through your concerns.