Why shareholder disputes are now high value litigation risks

A shareholder dispute rarely begins as a legal dispute.

The relationship breaks down. Communication deteriorates. Decisions are taken without you.

Over time, you may find yourself excluded from management, deprived of financial benefit and increasingly shut out of the business you helped build. You are basically frozen out of your own company.

What many treat as a commercial falling out is often the early stage of a shareholder dispute capable of developing into a substantial claim. These are no longer low‑level issues. Claims are increasing, more actively pursued and frequently centred on control, valuation and exit.

In practical terms, what begins as a breakdown in trust can quickly evolve into a dispute worth hundreds of thousands and often millions of pounds.

What “being frozen out” actually looks like in practice

The legal issues tend to arise from familiar situations. In owner‑managed businesses, shareholders expect involvement, transparency and financial participation. When that breaks down, the warning signs are usually clear.

A shareholder may be removed as a director or excluded from decisions. Financial information is restricted. Dividends stop while those in control increase their own remuneration.

In more serious cases, ownership is diluted, company funds are misused, or business opportunities are diverted elsewhere.

What matters is the cumulative effect. The outcome is typically the same: loss of control, loss of visibility and ultimately loss of value.

What counts as unfair conduct?

Unfair conduct arises where the company’s affairs are run in a way which unfairly disadvantages a shareholder.

The key point is that it does not require dishonesty. The question is whether the conduct departs from what the shareholder was reasonably entitled to expect and causes real prejudice.

In practical terms, this commonly includes:

• Being excluded from management where involvement was expected
• Dividends being withheld while value is extracted through salaries
• Shares being diluted without proper justification
• Company assets or opportunities being diverted
• Refusal to provide information or comply with basic governance

Sometimes a single serious act is enough. More often, it is a pattern of behaviour over time which justifies intervention.

What is the legal route available?

The main remedy is a claim under section 994 of the Companies Act 2006.

This allows a shareholder to challenge the way the business is being run and ask the court to intervene. The strength of this route is its flexibility. It is not limited to strict breaches of contract or duty. Instead, it focuses on fairness in a commercial context.

From a strategy perspective, this is often the most effective route because it gives the court wide discretion to resolve the dispute in a practical way.

Why do these shareholder disputes turn into £1m+ claims?

These disputes are rarely just about conduct. They quickly become disputes about value.

In most cases, the objective is a buyout. One shareholder seeks to exit at a fair value. That valuation exercise becomes the central battleground.

The numbers increase because:

• Historic profit extraction is often added back into the valuation
• Undervaluation arguments can significantly shift figures
• Lost opportunities (such as a failed sale) may be taken into account
• Disputes often concern established, profitable businesses

As a result, what begins as a governance issue often develops into a high‑value financial claim.

What can the court do?

The court has wide discretion in how it resolves these disputes.

The most common outcome is an order requiring one shareholder to buy the other’s shares at a fair value. This provides a clean break and is often the commercial objective from the outset.

In addition, the court can regulate how the company is run going forward, require specific actions to be taken or reversed and in some cases authorise claims to be brought on behalf of the company itself. In rare situations, particularly where there has been a complete breakdown in trust, the court may order that the company be wound up.

In practice, the key battleground is usually valuation. The question is not simply whether unfair conduct occurred, but what financial impact that conduct has had.

Recent cases are reshaping the shareholder dispute landscape

The courts have recently taken a more direct and commercially focused approach to shareholder disputes, which has important implications for how and when claims are brought.

A key development is the Supreme Court’s decision in THG plc v Zedra Trust Company (Jersey) Ltd [2026], which confirmed that claims for unfair prejudice are not subject to a fixed statutory limitation period. In practical terms, that significantly expands the scope of potential claims.

Conduct which might previously have been viewed as too historic can now form part of the overall case, particularly where it reflects a continuing pattern of behaviour. For claimants, this creates a wider platform from which to bring a claim. For those in control of companies, it increases exposure and reinforces the need for early strategic decisions.

The courts have also made clear that unfair prejudice petitions must be used for their proper purpose. In Ronnan v Stansfield [2025], the court considered the limits of the remedy and made it clear that it is not intended to replace other available routes where those remain viable. The emphasis is on substance rather than tactics.

Where a petition is deployed without a proper foundation, there is a real risk it will be challenged at an early stage.

Alongside this, there has been a noticeable shift towards examining how a business is actually run, rather than relying solely on its formal structure.

In Saxon Woods Investments Ltd v Costa [2025], the court was prepared to intervene where one party controlled the exit process and limited the flow of information to other shareholders, effectively undermining their ability to protect their position. That approach reflects a broader willingness to look at the commercial reality of the relationship between shareholders.

Common early mistakes that reduce claim value

Value is often lost at an early stage.

Delays in taking advice can restrict access to information and weaken position. Continuing informal arrangements despite a clear breakdown in trust makes it harder to evidence misconduct. Some shareholders accept early exit offers which do not reflect true value, simply to resolve matters quickly. By the time formal steps are taken, the commercial balance has often shifted.

That involves understanding share value, securing access to company information and identifying any misuse of assets or breaches of duty. From there, a structured strategy can be deployed to apply pressure at the right time.

Most disputes settle without trial, but only where one party establishes a strong legal and commercial position early.

Key takeaway

If you have lost influence, access to information, or financial benefit, the issue is unlikely to resolve itself.

In most cases, the dispute is already underway. The question is whether it is addressed early from a position of strength, or allowed to develop in a way that diminishes value.

These are high‑stakes disputes where timing matters. Early advice allows you to secure evidence, protect your position, and maximise the outcome.

How Morr & Co can help?

If you have any questions or would like any further information on the content of this article, please do not hesitate to contact our Dispute Resolution team on 0333 038 9100 or email info@morrlaw.com and a member of our expert team will get back to you.

Disclaimer
Although correct at the time of publication, the contents of this newsletter/blog are intended for general information purposes only and shall not be deemed to be, or constitute, legal advice. We cannot accept responsibility for any loss as a result of acts or omissions taken in respect of this article. Please contact us for the latest legal position.