Company shareholder disputes are often expensive, time consuming and destroy relationships. That is why we recommend that dispute resolution clauses be included in an executed Shareholders Agreement.
Notwithstanding legislative remedies are clumsy, inefficient and very expensive they are sometimes the only remedy available.
The common legal remedies include:
We will discuss the types of orders that can be in future editions of The Technical Briefing.
Can the provisions of Part 5.3A of the Act* be relied upon to assist in the resolution of Disputes?
As you will recall the object of this Part is to provide for the business, property and affairs of an insolvent company to be administered in a particular way.
The court heard in the matter of Re Australian Blue Mountain International Cultural and Tourist Group Pty Ltd [2015] NSWSC 937 that a dispute between minority and majority shareholders had arisen. The majority shareholders had approached a liquidator to assist the parties to negotiate a settlement of their dispute. In the absence of the minority shareholders the Liquidator was appointed Administrator and then subsequently attempted to resolve the disputes between the two groups of shareholders.
Upon the minority shareholders successfully challenging the appointment of the Liquidator the court unequivocally stated that ”…… Part 5.3A of the Corporations Act was not introduced as a mechanism to resolve shareholders disputes and its use for that purpose would tend to expose the company, its creditors and its contributories to a risk….”
So what are some other options which could be considered to resolve disputes between shareholders in the absence of well drafted Shareholders Agreement?
If you have further questions, please contact us at frank@franklaw.com.au.
This is not legal advice.