Directors are often accustomed to being in control of a business.
Owing to the nature of running a business, directors’ disputes are all too common, and can arise for various reasons.
Generally speaking, directors’ disputes can be grouped into three categories:
- Strategy and approach
- Governance
- Director’s conduct
Strategy and approach disputes
Strategy and approach disputes are often the most common and, generally, do not require recourse to lawyers.
It could be argued that a certain level of disagreement at a board level is to be expected or even encouraged to test the approach being taken.
When these become more serious, they can be damaging to a business and its future.
The centre of resolving these types of disputes usually hinges on the authority of the directors.
This includes a director’s remit and who has the authority to take specific actions and at what time.
In essence, understanding what authority directors do/do not have delegated to them, what authority is reserved by the board as a whole, and how these powers are exercised all play a crucial role in resolving these types of disputes.
Governance disputes – appointment or removal of a director
In theory, appointing a new director should be a straightforward process.
However, this can lead to key disputes on the board.
A common issue that raises disputes is when one director/group of directors blocks the appointment of a candidate.
Often, this arises when directors holding shares or even acting for a group of shareholders want their representation on the board, but there is a clash of personalities.
The articles of association of a company govern the authority of directors to appoint another director.
These types of disputes often arise as a result of underlying disputes that haven’t been fully resolved and come to light at this stage.
At the other end of the spectrum, the removal of a director can be very contentious, and trigger a cascade of other disputes.
Having the ability to remove a director has strict statutory processes that must be followed.
This is usually set down within the Companies Act and the articles of association of the company.
Directors conduct disputes
Another contentious dispute is claims of misconduct between directors.
There is a great deal of room for interpretation within the Companies Act, with the statement of duties ranging from narrow to broad.
The main areas of directors conduct disputes are:
- Claims over breach of duty to act in the best interests of the company
- Disputes of conflict of interests
- Directors leaving a company and attempting to exploit information, knowledge, and opportunities gained whilst in the role
If you need advice on director disputes, contact us today.