How to Navigate a Director Dispute
Part 2 – Initial Steps to Consider
This second post in our series looks at ways to try and avoid trouble brewing.
When directors are involved in a business together, the idea of a dispute developing may seem unlikely. Especially when you are family or friends who have worked hard together to build the company and make it a success. When your company is generating revenue, hiring talented team members, applying for investment or looking to exit, the last thing you want to deal with is an all-consuming director dispute.
Unfortunately, disagreements between directors are common and can significantly impede business growth by taking up the time and resources of leadership teams. This is particularly true when a dispute involves the directors’ position as shareholders. These disputes can dramatically impede the ability of the company to grow, and may even lead to insolvency or a winding up of the Company. Let's face it when it reaches this point the position is untenable and there is going to be little left to distribute despite a lot of hard work.
The best way to minimise the impact of a director dispute on a business is by ensuring that there are policies and procedures in place to handle disputes. This includes director's service contracts, a shareholders agreement and provisions in the articles of association that set out clear procedures governance, for example: limits on director's duties, the removal and appointment of directors, voting rights, conflicts of interest and procedures to follow if a dispute cannot be resolved at Board level.
By investing to get things right at the outset you could be saving so much heartache, stress and money for the future.
If ever you are unsure, the Commercial Litigation team at Ward Hadaway are always happy to have a chat and steer you in the right direction.
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