Directors’ disputes

Strategic disputes

Disputes over strategy between directors are common and generally do not need recourse to lawyers.  Reasonable disagreement at a board level is to be expected and indeed in many businesses encouraged to test the correct approach to take.

However, where these become more serious, they can become more damaging to the business and its future.  That is where the advice from experts in corporate disputes is required.

At the core of resolving these issues is the authority of the directors; what their respective remits are; and who has the authority to take what actions at what time.

Fundamental to understand is what authority directors do or do not have delegated to them as individuals by the company; what authorities are reserved for the board as a whole; and how these powers may be exercised.  After that, it is critical to understand the rights that a director has to proceed with implementing their vision of a business; whether any other agreements or remits constrain them; and whether those directors are acting within their authority or not.

This applies most importantly in public listed companies where there are commitments given and obligations owed to deliver upon understandings between the Shareholders, but also in private companies.

Whether it is admission documents or other core documents that are relied upon by third parties, ensuring that a director is adhering to the limits of their authority under those is crucial.

Appointment of directors

The appointment of directors should, in theory, be simple but can lead to major disputes on the board.

A simple issue between directors is when a dispute over appointing a director arises to whether one director or group of directors can block the appointment of a particular candidate.

This can often arise when disputes involving directors holding shares or acting for particular groups of shareholders want their own representative on the board, but personality clashes arise.

The authority of directors to appoint another director is governed by the articles of association of a company with a fallback of the Companies Act.

Ultimately these are issues which often involve other underlying disputes which have or have not been fully aired but come to light at this juncture.

Removal of a director

The removal of a director can often be the most contentious of disputes and again can be the trigger for other disputes, or more often disputes concerning the removal of a director can be the result of longstanding issues coming to ahead.

The ability to remove a director is set down within the Companies Act and within the articles of association of the company, with strict statutory processes that must be followed.  The broader issue is the consequence of the removal of a director; the authority of a party to remove a director and the effect of it.

Whether it is issues surrounding directors who have been disqualified from office under the articles of association or otherwise; whether they have breached the term under a shareholders agreement or directors service agreement or qualifying criteria; or whether it is simply a desire of a director or shareholder to remove another director for good or bad reasons, our solicitors have considerable experience in dealing with such disputes.

Breach of director’s duties

Disputes between directors over claims for breach of director’s duties are highly contentious.

Director’s duties within the Companies Act range from narrow to broad and leave significant room for our expert lawyers to interpret and manage to the best end for our clients.

Some disputes arise while directors are still in office such as claims over breach of duty to act in the best interests of the company and to promote its success, or disputes over potential conflicts of interest or otherwise.

Since the codification of the director’s duties claims alleging breach of duty to promote the success of the company is the most common that, we see due to the breadth of the provisions and the range of issues that can arise.  Expertise and experience in dealing with these issues is therefore extremely important.

Disputes can also arise after a director has left the company most often regarding the attempt to exploit information, knowledge, and opportunities learnt of whilst in office as a director.  The Companies Act has specific provisions in dealing with these issues and disputes around such improper competition or exploitation of opportunities leaving office are ones we have considerable experience dealing with.

Our experience

Our expert lawyers have extensive experience in dealing with disputes surrounding the appointment and removal of directors from public listed companies and private companies.

We also have significant recent experience in terms of dealing with disputes over claims for breach of director’s duties and the exploitation of opportunities after directors have left the company.

Our specialist advice covers the avoidance of disputes; advice upon the rights and obligations upon directors and former directors to minimise the prospect of costly litigation arising in the future, and in representing parties in disputes through the litigation process including court action to resolve these.

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