Directors' Disputes

How do you avoid a Directors' dispute?

Directors’ disputes flare up when a company’s directors disagree on particular issues relating to their business’ finances, operations, management or governance responsibilities.  Equally they can arise when some feel one of their fellow directors is not fulfilling their duties.

Friction at the board table is never a positive.  Not only does it disrupt the day-to-day running of the business, but it can also cause the decision making process to slow.  This will have its own impact on future plans, expansion and financial performance.  If the rift becomes public knowledge, it can also dent the business’ brand and reputation (which will only worsen if the dispute ends with the removal of a director) and could sow doubt into the minds of its customers, shareholders, and investors.

Worse still, it can also lead to expensive legal action which will only worsen all the above. 

Preventing directors’ disputes

The good news is that it is possible to help prevent directors’ disputes.  Here are a few tips to  help you avoid a director’s dispute:

1. Ensure that the roles and responsibilities of all your directors are clearly set out in your policies and articles of association.
2. Educate your directors on their fiduciary duties as outlined in the Companies Act 2006 to ensure they always act in the best interests of the company and understand how to identify potential conflicts of interest.
3. Make sure your directors feel comfortable communicating openly about the key issues, both at regular board meetings and offline.
4. Minute all meetings and circulate the minutes so people can ask for clarification as required before misunderstandings escalate.
5. Implement a formal Dispute Resolution Procedure that informs people how to address any issues (including making people aware of any mediation/arbitration options) before they escalate.
6. Last but definitely not least, take legal advice as soon as an issue arises. 

We appreciate that with so much else to attend to when you’re directing a business, it is often easy to sit back and wait for things to blow over or right themselves.  In our experience this very rarely happens so even if you only ask a solicitor for some initial ‘just in case’ advice, this advice will quite often pay dividends. 

If you think there may be a risk of a directors’ dispute developing in your boardroom, please contact one of our dispute resolution specialists contact us online here, or to speak to our team call 0114 266 6660.