Company, partnership and insolvency barrister advice

Disputes between company owners, directors, shareholders or business partners can threaten the management, finances and future of a business. Early advice can help identify the parties’ legal rights and whether the relationship can be repaired, restructured or brought to an orderly end.

The barrister can help you understand the company or partnership documents, assess the strengths and weaknesses of your position and decide what practical steps to take next.

Company, and partnership insolvency disputes we may be able to help with

Shareholder disputes

Shareholder disputes may arise where the owners of a company disagree about its management, finances or future direction.

Advice may cover:

• the rights attached to particular shares;

• voting rights and decision-making;

• disputes about dividends;

• access to company information;

• exclusion from management;

• dilution of a shareholder’s interest;

• allotment, transfer or sale of shares;

• compliance with shareholders’ agreements;

• rights under the articles of association;

• alleged agreements or understandings between shareholders;

• disputes about the value of shares; and

• possible exit or buyout arrangements.

Company control and management

Disagreement about who controls a company can prevent important decisions from being made and damage the business.

A barrister may advise on:

• the respective powers of shareholders and directors;

• board and shareholder voting;

• the validity of company meetings and resolutions;

• quorum requirements;

• appointment and removal of directors;

• authority to act for the company;

• disputes over bank accounts or financial control;

• the issue or transfer of shares;

• deadlock between equal shareholders;

• compliance with the company’s articles; and

• applications for urgent court relief.

Directors’ duties

Company directors owe statutory and other duties to the company. A dispute may arise where a director is alleged to have acted for an improper purpose or placed personal interests ahead of those of the company.

Advice may concern:

• the duty to act within the director’s powers;

• promoting the success of the company;

• exercising independent judgment;

• reasonable care, skill and diligence;

• conflicts of interest;

• personal benefits from third parties;

• interests in proposed or existing transactions;

• misuse of confidential information;

• diversion of business opportunities;

• competing businesses; and

• the remedies available for breach.

A claim for breach of directors’ duties will ordinarily belong to the company rather than an individual shareholder. The correct claimant and procedure must therefore be identified before action is taken.

Misuse of company money, assets or opportunities

A director, shareholder or employee may be accused of using company resources for an unauthorised purpose.

Advice may cover:

• unauthorised payments or transfers;

• personal use of company money or property;

• diversion of customers, contracts or opportunities;

• undisclosed commissions or benefits;

• excessive remuneration or expenses;

• transactions with connected persons;

• disposal of company assets at an undervalue;

• repayment and restoration of company property;

• accounts of profits;

• injunctions to prevent further dealings; and

• preservation or recovery of company assets.

Unfair prejudice and minority shareholders

A shareholder may be able to bring an unfair-prejudice petition where the company’s affairs have been conducted in a way that is unfairly prejudicial to that shareholder’s interests.

Advice may concern:

• exclusion from management in a quasi-partnership company;

• diversion of business or assets;

• excessive remuneration paid to controlling shareholders or directors;

• failure to pay dividends;

• dilution of a minority shareholding;

• issue or transfer of shares for an improper purpose;

• breaches of the articles or shareholders’ agreement;

• failures to provide information;

• breakdown of mutual trust and confidence;

• whether the conduct is both prejudicial and unfair;

• valuation of the shareholder’s interest; and

• the remedies the court may order.

Derivative claims

Where a wrong has been done to the company, a shareholder may in some circumstances seek permission to continue a claim on the company’s behalf.

A barrister may advise on:

• whether the alleged wrong was committed against the company;

• breach of duty, negligence, default or breach of trust by a director;

• whether the company itself is likely to pursue the claim;

• the shareholder’s standing to bring a derivative claim;

• the court’s permission procedure;

• ratification by shareholders;

• whether another remedy would be more appropriate; and

• the potential costs and benefits of the proposed proceedings.

Removal, resignation and appointment of directors

Disputes may arise when shareholders seek to remove a director or when a director resigns but remains a shareholder, employee or creditor.

Advice may cover:

• the procedure for removing a director;

• notice and meeting requirements;

• the director’s right to make representations;

• the interaction between company law, the articles and any shareholders’ agreement;

• termination of employment or a service agreement;

• resignation from office;

• restrictions after departure;

• continuing share ownership;

• repayment of money owed to or by the director;

• Companies House filings; and

• claims resulting from an invalid or wrongful removal.

Removal from office as a director does not necessarily end the person’s employment, shareholding or contractual rights.

Shares, investments and business ownership

Disagreement may arise about who owns an interest in a company or the terms on which money was invested.

A barrister may advise on:

• legal and beneficial ownership of shares;

• promises to allot or transfer shares;

• nominee shareholdings;

• oral or informal investment agreements;

• whether money was an investment, loan or gift;

• pre-emption rights;

• restrictions on transferring shares;

• compulsory-transfer provisions;

• good-leaver and bad-leaver clauses;

• share valuation;

• rectification of the register of members; and

• recovery of an investment.

Company loans and directors’ loan accounts

Money paid into or withdrawn from a company may be characterised differently by the parties.

Advice may cover:

• whether a payment was a loan, investment, salary, dividend or capital contribution;

• repayment terms;

• interest;

• directors’ loan accounts;

• disputed withdrawals;

• loans between related companies;

• guarantees and security;

• set-off and counterclaims;

• the effect of insolvency; and

• proceedings to recover money due.

Dividends and distributions

Disputes may arise about whether shareholders are entitled to receive dividends or whether payments made by the company were lawful.

Advice may concern:

• the declaration and payment of dividends;

• rights attached to different classes of shares;

• available distributable profits;

• unequal or selective payments;

• disguised distributions;

• recovery of unlawful distributions;

• directors’ responsibility for authorising payments; and

• whether a failure to pay dividends forms part of wider unfairly prejudicial conduct.

Shareholders’ agreements and articles of association

The rights of shareholders and directors may be governed by several documents, including the articles of association, a shareholders’ agreement and investment documents.

A barrister may advise on:

• the relationship between the different documents;

• voting and reserved matters;

• board composition;

• financing obligations;

• restrictions on competition;

• confidentiality;

• deadlock procedures;

• compulsory share transfers;

• valuation mechanisms;

• rights of first refusal;

• drag-along and tag-along provisions;

• breach and enforcement; and

• exit arrangements.

Partnership disputes

A partnership can arise through an express agreement or, in some circumstances, from the way people carry on business together.

Advice may cover:

• whether a partnership exists;

• the terms of a written or oral partnership agreement;

• the partners’ respective rights and duties;

• management and decision-making;

• entitlement to profits;

• responsibility for losses and liabilities;

• drawings and capital contributions;

• access to accounts and records;

• authority to bind the partnership;

• conflicts of interest;

• competing businesses; and

• exclusion of a partner from the business.

Where there is no comprehensive partnership agreement, statutory default rules may determine the partners’ rights and obligations.

Partnership property and accounts

Disagreement may arise about whether an asset belongs to the partnership or to an individual partner.

A barrister may advise on:

• ownership of business premises;

• equipment, vehicles and other assets;

• goodwill and intellectual property;

• assets acquired with partnership money;

• property held in one partner’s name;

• capital accounts;

• drawings and expenses;

• undisclosed income;

• the taking of partnership accounts;

• recovery of partnership property; and

• distribution of assets following dissolution.

Dissolution of partnerships

A breakdown in the relationship between partners may result in the partnership being dissolved.

Advice may concern:

• whether a dissolution has occurred;

• notice of dissolution;

• dissolution under the partnership agreement;

• expulsion or retirement of a partner;

• continuing use of the business name or assets;

• collection of debts and payment of liabilities;

• completion of existing business;

• valuation and sale of partnership assets;

• distribution of the remaining property;

• responsibility for continuing obligations; and

• court proceedings to wind up the partnership’s affairs.

Limited liability partnership disputes

Members of a limited liability partnership may have rights and obligations under an LLP agreement as well as the statutory framework.

Advice may cover:

• the terms of the LLP agreement;

• management and voting rights;

• profit shares and drawings;

• capital contributions;

• admission, retirement or expulsion of members;

• duties owed by members;

• misuse of LLP assets or opportunities;

• access to financial information;

• deadlock; and

• winding up or restructuring the LLP.

Breakdown of a business relationship

Some businesses are operated through a combination of companies, partnerships, joint ventures and informal agreements.

A barrister may advise on:

• identifying the correct legal structure;

• ownership of business assets;

• rights to income and profits;

• responsibility for business debts;

• access to premises, systems and records;

• use of confidential information;

• diversion of customers or opportunities;

• valuation and buyout proposals;

• negotiated separation agreements;

• injunctions or preservation of assets; and

• whether the business should be sold, restructured or wound up.

What advice can the barrister provide?

Depending on the questions accepted, the barrister may help you understand:

• your rights as a shareholder, director, partner or LLP member;

• the meaning and effect of the relevant business documents;

• whether a director or business owner may have breached a duty;

• whether company or partnership assets have been misused;

• the strengths and weaknesses of your position;

• what financial information or other evidence may be required;

• whether an unfair-prejudice petition or derivative claim may be available;

• the possible remedies, including a buyout, account, injunction or damages;

• whether negotiation, mediation or court proceedings may be appropriate; and

• the practical steps you should consider taking next.

Insolvency and bankruptcy matters we may be able to help with

Statutory demands

A statutory demand may be served as a preliminary step towards bankruptcy or the winding up of a company. It should not be ignored because strict and relatively short time limits may apply.

Advice may cover:

• whether the statutory demand is valid;

• whether the debt is genuinely disputed;

• whether the debtor has a counterclaim, set-off or cross-demand;

• whether the debt is secured;

• defects in service or the contents of the demand;

• an individual’s application to set aside a statutory demand;

• an application to restrain the presentation or advertisement of a winding-up petition against a company;

• the evidence required to challenge the demand; and

• the consequences of taking no action.

The procedure is different depending on whether the demand has been served on an individual or a company. A company cannot apply to set aside a statutory demand in the same way as an individual, although it may be able to seek an injunction restraining the presentation or advertisement of a winding-up petition.

Bankruptcy petitions

A bankruptcy petition may have serious consequences for an individual’s property, income, business activities and ability to obtain credit.

A barrister may advise on:

• whether the legal requirements for presenting a bankruptcy petition have been met;

• disputed debts relied upon in support of a petition;

• service of the statutory demand or petition;

• compliance with the applicable procedure;

• applications to dismiss or adjourn a petition;

• applications to restrain presentation or advertisement;

• whether the debt has been paid, secured or otherwise resolved;

• the effect of an outstanding appeal or related proceedings;

• possible costs consequences; and

• the effect of a bankruptcy order.

Winding-up petitions

A creditor may seek to wind up a company that is unable to pay its debts. A winding-up petition can have an immediate and serious effect on the company, including its bank account, trading position and reputation.

Advice may concern:

• whether the petition debt is genuinely disputed on substantial grounds;

• whether the company has a genuine and substantial cross-claim;

• whether the statutory requirements have been satisfied;

• applications to restrain presentation or advertisement of a petition;

• applications to dismiss or adjourn the petition;

• substitution or support by another creditor;

• the effect of payment after presentation of the petition;

• the consequences of a winding-up order; and

• alternative means of resolving or recovering the debt.

Options available to creditors and debtors

The appropriate course will depend on whether the debt is admitted or disputed, the debtor’s financial position and the objective the client is seeking to achieve.

Advice may cover:

• whether insolvency proceedings are appropriate;

• alternatives to a statutory demand or petition;

• ordinary debt-recovery proceedings;

• enforcement of an existing judgment;

• negotiation or settlement;

• security for a debt;

• individual or company voluntary arrangements;

• administration, liquidation or bankruptcy;

• the likely costs and commercial consequences; and

• the practical prospects of recovering money or preserving assets.

A barrister can provide legal advice about these options but does not act as a financial adviser, debt adviser or insolvency practitioner.

Disputes with insolvency practitioners

Disputes can arise about the decisions and conduct of trustees in bankruptcy, liquidators, administrators and other office-holders.

A barrister may advise on:

• the powers and duties of the office-holder;

• requests for information or documents;

• decisions concerning the ownership or disposal of assets;

• the admission or rejection of a creditor’s proof of debt;

• the conduct of the bankruptcy, liquidation or administration;

• challenges to an office-holder’s decision;

• applications for directions or other court orders;

• allegations of unfair harm or improper conduct; and

• the remedies potentially available to creditors, debtors, directors or other interested parties.

Ownership of property and other assets

Disagreement may arise over whether an asset belongs to a bankrupt individual, an insolvent company or another person.

Advice may concern:

• legal and beneficial ownership of property;

• jointly owned homes or investment properties;

• trusts of land and declarations of trust;

• contributions made by a spouse, partner or family member;

• company assets used or held by directors;

• goods supplied under retention-of-title terms;

• assets transferred before insolvency;

• tracing and recovery of money or property; and

• applications for possession or sale of property.

These disputes may require consideration of property, trust and company law as well as insolvency law.

Transactions before insolvency

A trustee in bankruptcy or liquidator may investigate transactions entered into before insolvency and seek to recover property or money.

Advice may cover allegations involving:

• transactions at an undervalue;

• preferences given to particular creditors;

• transactions intended to defraud creditors;

• excessive pension contributions;

• invalid or unregistered security;

• repayment of director or shareholder loans;

• transfers to relatives, connected persons or associated companies;

• recovery proceedings brought by an office-holder; and

• possible defences or settlement options.

Directors’ duties and personal liability

A limited company ordinarily has a legal identity separate from its directors. However, directors may face personal claims in connection with an insolvent company in some circumstances.

A barrister may advise on:

• directors’ duties where a company is insolvent or approaching insolvency;

• wrongful or fraudulent trading;

• misfeasance;

• transactions at an undervalue or preferences;

• unlawful dividends;

• repayment of overdrawn directors’ loan accounts;

• personal guarantees;

• claims brought by a liquidator or administrator;

• possible disqualification proceedings; and

• the evidence and defences relevant to an alleged breach.

The effect of insolvency on existing claims and obligations

Bankruptcy or liquidation may affect existing court proceedings, judgments, contracts and enforcement action.

Advice may cover:

• whether existing proceedings can continue;

• whether permission or consent is required;

• the effect of insolvency on enforcement;

• whether a debt is provable in the insolvency;

• the treatment of secured and unsecured debts;

• contractual termination or insolvency provisions;

• guarantees and obligations owed by third parties;

• whether a liability may survive bankruptcy or liquidation; and

• the effect of discharge from bankruptcy.

What advice can the barrister provide?

Depending on the questions accepted, the barrister may help you understand:

• your rights, obligations and available options;

• whether insolvency proceedings are legally appropriate;

• whether a debt can be challenged;

• the strengths and weaknesses of your position;

• the relevant procedure and any immediate deadlines;

• what evidence or further information may be required;

• the remedies or orders that may be available;

• the likely costs and practical consequences;

• whether negotiation, ordinary civil proceedings or insolvency proceedings may be appropriate; and

• the steps you should consider taking next.

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