Settlement of a shareholder dispute

A client came to see me about his dispute with a fellow director and shareholder. There was a shareholders agreement in which all the shareholders in the company were to agree before there could be a change in the distribution of the profits of the company. Our client was given a bigger share of the profits because he had contributed the majority of the capital for the company but in recognition of the expertise of the fellow director, he was given the majority shares in the company. Due to a falling out the fellow director held a meeting in which he passed a resolution to change the distribution of the profits in his favour and actually distributed some of the profits according to the “resolution” passed by him.

Our client took up action in the Supreme Court for a declaration that the distribution and the resolution passed by the fellow director were both invalid and for an order that all excess payment made to the fellow director be paid back to the company. The fellow director capitulated and after some negotiations decided to sell off his shares in the company to our client for a reasonable sum in exchange for a withdrawal of the court action.

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