Our client, a 30% minority shareholder in a leading restaurant chain, approached Aldwych Legal after a dispute with the majority shareholders and directors. They believed unfair commercial practices had occurred from the outset, infringing their minority rights. The issue relates to unfair prejudice under the Companies Act 2006, particularly the pressure to sign heads of terms for a separate venture without adequate time for review.
What Happened
The client is based in London and required advice from shareholder dispute solicitors in London, with the business controlled by a small group of majority shareholders who sat on the board. In early discussions, the directors presented heads of terms for a new venture and urged signing without time to seek amendments. The client feared their 30% stake would be marginalised without proper safeguards.
Aldwych Legal carried out a rapid review of shareholdings, board decisions, and related agreements to assess whether there had been unfair prejudice and breaches of directors’ duties.
Legal Issues
- Unfair prejudice claim under the Companies Act 2006 arising from oppressive conduct by the majority toward the minority shareholder.
- Potential breach of directors’ duties to act in the best interests of the company and to avoid conflicts of interest.
- Risk of entering into onerous terms without adequate review, breaching commercial protocols.
- Need to comply with CPR and Pre-Action Protocols and explore ADR as per commercial dispute guidelines.
Our Approach
We immediately assessed the viability of an unfair prejudice claim under the Companies Act 2006 and gathered internal records, shareholder agreements, board minutes, and correspondence.
We engaged in pre-action protocol steps, issued a targeted letter before action, and requested a transparent justification for the proposed terms while outlining safeguards for the minority interest.
We then steered negotiations toward ADR, recommending an early, cost-effective resolution and avoiding court proceedings.
Outcome
The dispute was resolved without court proceedings following constructive negotiations.
The parties agreed terms that protected the client’s minority rights, with a formal commitment not to prejudice the 30% stake and to subject heads of terms to proper review and disclosure.
ADR facilitated a swift, cost-effective resolution, saving time and expense for the client.
Result / Why It Matters
Aldwych Legal’s approach—early assessment, adherence to commercial and CPR protocols, and proactive ADR—demonstrates how minority shareholders can protect their rights without resorting to litigation.
