Meeting the increase in shareholder and partnership disputes with mediation

27 June 2023

With the UK’s economy continuing to struggle, shareholder and partnership disputes are on the rise, with ailing businesses finding it increasingly difficult to remain aligned. The use of alternative dispute resolution (ADR) such as mediation is also becoming more prevalent as a means to resolve these types of disputes without recourse to the courts and costly litigation.

This blog examines the use of mediation as a form of ADR in the context of shareholder and partnership disputes, from why this is especially suitable for resolving conflict caused by a number of company or partnership issues to the types of disputes that mediation can be used for.

Using meditation to settle shareholder and partnership disputes

Widely advocated within the UK’s civil justice system as an alternative means of settling a dispute, the benefits of mediation are well-established, not least because it offers a much more affordable, effective and expeditious form of dispute resolution than the traditional-style court claim.

Mediation also provides a risk-free way of resolving a dispute, on mutually agreeable terms, rather than leaving the outcome to the judge’s discretion. Importantly, even where a claim is successfully litigated, this does not necessarily mean that the court will award the specific remedy sought, such as one party buying the other out or an order to expel a partner from the partnership.

By taking advantage of the flexibility offered by mediation, the parties remain in control of the outcome. In many cases, given the wide range of creative solutions that can be utilised in the context of mediation, this can provide more scope to find a mutually agreeable basis on which to move forward, especially where the case requires the parties to think outside the box. It can also help to save valuable time and expense that can be better invested in the business.

The shareholder and partnership issues that mediation can be used for

There are a whole host of different issues that can arise in the context of shareholder and partnership disputes, where mediation can offer an ideal forum within which to resolve any conflict.

One of the most common reasons for shareholder conflict is where company directors disagree on decisions around the management or overall direction of the company, particularly in small family- run companies, where even a minor disagreement can spark huge shareholder backlash.

Shareholder disputes also often arise around minority shareholders complaints, such as not being kept fully informed or being paid full dividends, as well as alleged breaches of a director’s fiduciary duties.

By using mediation to address these types of disputes, the parties will have at their disposal any one of a number solutions to resolve the matter without the court’s intervention, including one party buying the other party out or partitioning the business in the fairest possible way. In some cases and, perhaps, most importantly of all, the fact that mediation is non-adversarial can often help to pave the way, where appropriate, for a positive working relationship between the parties moving forward.

© Melissa Worth, June 2023

Legal disclaimer

The matters contained within this article are intended to be for general information purposes only. This blog does not constitute legal advice, nor is it a complete or authoritative statement of the law in England and Wales and should not be treated as such.

Whilst every effort is made to ensure that the information is correct, no warranty, either express or implied, is given as to its’ accuracy, and no liability is accepted for any errors or omissions.

Before acting on any of the information contained herein, expert advice should always be sought.

The Dispute Adviser

A legal blog by Melissa Worth
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