---
title: "Director and Shareholder Disputes: What the Court Can Actually Do? - Chris Clayton - Commercial & Property Dispute Lawyer in the UK"
description: "Director and shareholder disputes can quickly become complex. Chris Clayton explains unfair prejudice claims, share buy-outs, valuation and the options for resolution."
url: "https://www.rmclayton.co.uk/blog/director-and-shareholder-disputes-what-the-court-can-actually-do"
date: "2026-09-27T01:50:56+00:00"
language: "en-GB"
---

![Solicitor advising company director and shareholder regarding a dispute](//rmclayton.b-cdn.net/images/2026/08/12/director%20sharheolder%20blog%20image_large.jpg)#  Director and Shareholder Disputes: What the Court Can Actually Do?

  [General](https://www.rmclayton.co.uk/blog)    12 August 2026

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When the relationship between directors and shareholders breaks down, the instinct on both sides is usually the same. Each party wants the other out. What neither party has always thought through carefully is how that happens, what it costs, and how much control they’re about to hand to a judge.

This is one of the most common types of commercial dispute I deal with. It’s also one of the most misunderstood — not in terms of what happened, but in terms of what can realistically be done about it.

## The legal framework

Many director and shareholder disputes reach court as an unfair prejudice petition under section 994 of the Companies Act 2006. The petitioner — often a minority shareholder — argues that the company’s affairs have been conducted in a way that is unfairly prejudicial to their interests.

The conduct that underlies these cases varies considerably. I’m currently instructed across a range of them: wrongful extraction of cash from the business, directors setting up competing enterprises while still owing duties to the company, and poaching staff and clients on the way out.

The facts differ, but unfair prejudice is frequently the mechanism through which the shareholder dispute reaches the court.

The important question, though, is what happens if the petition succeeds.

## Wide powers, but a narrower range of practical outcomes

On paper, the court’s powers are extremely wide. Section 996 of the Companies Act 2006 allows the court to make such order as it thinks fit for giving relief from the unfair prejudice.

Those powers can include regulating the future conduct of the company’s affairs, requiring the company to do — or stop doing — particular things, authorising proceedings to be brought in the company’s name, and ordering shares to be purchased.

In practice, however, the outcome the parties are fighting about is often much narrower.

In a typical owner-managed company dispute, the real question is frequently **who buys whom out, and at what price**.

That matters, because once you strip away the allegations, witness statements and legal argument, the eventual solution available through litigation may be considerably less flexible than the parties imagine.

First, there’s the valuation question.

Any buy-out order requires a value to be put on the shares. In a private company with disputed accounts, contested conduct and no agreed methodology, that is rarely straightforward.

Valuation disputes within shareholder disputes are their own area of complexity — and their own source of cost.

Questions can arise over the appropriate valuation date, whether a minority discount should apply, how particular transactions should be treated and what effect the alleged wrongdoing has had on the value of the business.

Second, there is the possibility of winding up.

In appropriate cases, winding up may be sought as an alternative remedy. It is usually an outcome neither party particularly wants. Destroying the underlying business can produce the worst commercial result for everyone involved.

Third, there is the fundamental loss of control that comes with litigation.

The court determines whether unfair prejudice has occurred and, if it has, what relief should follow. If that involves a share purchase, questions about valuation and the terms on which the parties separate may ultimately be determined by the court rather than designed by the people who actually own the business.

And, of course, there is another possible outcome.

The petition can fail.

That possibility tends to concentrate minds when it is properly understood.

## Where mediation fits

This article is not about mediation itself, but rather the role it can play as an alternative to litigation. I’ve looked at mediation and how the process works in more detail [here](https://rmclayton.co.uk/blog/mediation-the-resolution-most-people-dont-consider-until-its-too-late).

Sometimes these cases need to go to court. Sometimes the conduct involved — particularly where there has been deliberate wrongdoing — makes a negotiated resolution difficult or impossible. Interim applications may also be necessary where the company or its assets need protecting.

That said, director and shareholder disputes are, as a category, particularly well suited to mediated resolution.

The reason is straightforward: the flexibility available in a negotiated settlement can be substantially greater than anything likely to emerge from a contested hearing.

A court-ordered buy-out ultimately produces a compulsory transaction on terms determined through the litigation process.

A negotiated settlement can be structured around the commercial reality facing the parties.

The buy-out price might be paid in instalments. Assets might be transferred rather than cash. Security can be agreed. The parties might divide different parts of the business between them. If they are going to continue in business together, the company’s constitution and shareholders’ agreement can be redrawn to deal with the problems that caused the dispute in the first place.

The transaction can also be structured with its tax consequences in mind, with appropriate specialist tax advice.

I’ve been involved in resolutions that looked nothing like a conventional buy-out because the parties had assets, obligations and commercial relationships that made a clean cash transaction the worst possible outcome for both of them.

That kind of resolution is much easier to achieve when the parties retain control of the outcome.

## The conduct question

One thing that comes up repeatedly in these cases is the relationship between the underlying conduct and the legal remedy.

A director who has wrongfully extracted cash, established a competing business or taken clients on the way out may well have committed breaches of their duties to the company.

But there is an important distinction here.

A breach of directors’ duties is ordinarily a wrong against the **company**. Depending on the circumstances, it may give rise to a claim in the company’s name or potentially a derivative claim.

The same conduct may also form part of an unfair prejudice case where the way the company’s affairs have been conducted has unfairly prejudiced a shareholder’s interests.

That distinction matters when deciding what claim to bring, against whom, and what remedy to seek.

Where there has been serious misconduct, it may also have consequences for the terms of any eventual buy-out and the valuation exercise.

In a negotiated context, meanwhile, the underlying conduct becomes part of the commercial leverage available to the parties.

How you deploy that leverage, and when, is one of the more consequential tactical decisions in this kind of dispute.

## The practical question

If you’re a director or shareholder and the relationship with your co-owners has broken down — whether you’re the one alleging wrongdoing or the one facing allegations — the most useful thing you can do early is understand what the realistic outcomes actually are.

Not what you’d like to happen.

What a court can actually order. What the process is likely to cost. How long it might take. What the shares might be worth. And what a negotiated alternative could look like.

That conversation, had early and honestly, tends to produce better outcomes than the alternative.

These cases are rarely straightforward, but the earlier you get proper advice, the more options you are likely to have.

If you want a conversation — even just to think through the situation and explore your options — you can book a call [here](https://rmclayton.co.uk/contact).

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