Shareholder disputes rarely arrive at a convenient time. A disagreement about dividends, strategy or who is pulling their weight can quickly turn into a stand-off that affects the whole business. The good news is that most disputes in Scotland are resolved without a court hearing. This guide explains why shareholder disputes happen, the rights shareholders have, the routes to resolving a dispute under Scots law and the remedies available when those routes fail.
In brief
- Most disputes start with control, money or roles, and are made worse by vague or missing documents.
- Your shareholders’ agreement and Articles of Association are the first place to look, because they often set out the process.
- Negotiation, mediation and a negotiated buy-out resolve most disputes without going to court.
- Where they do not, a minority shareholder can petition the court for relief from unfairly prejudicial conduct, often leading to a buy-out order.
- In Scotland, a shareholder needs the court’s permission to raise derivative proceedings on behalf of the company.
Why shareholder disputes happen
In private companies, the same people are often shareholders, directors and employees, so a disagreement in one role spills into the others. The most common triggers are:
- disagreements over strategy, investment or whether profits should be reinvested or paid as dividends
- a shareholder being excluded from management or from information about the company
- one director drawing excessive pay or diverting opportunities to another business
- a founder wanting to leave, or the others wanting them to leave
- family changes, such as a divorce, death or the next generation joining the business
- deadlock between equal shareholders who cannot agree on anything
First steps when a dispute starts
- Read the documents. The shareholders’ agreement and Articles of Association may set out a dispute process, exit rights, deadlock provisions or a valuation method that applies.
- Keep records. Keep copies of board minutes, emails, accounts and anything showing how decisions were made. Avoid deleting or altering company records.
- Stay professional. Continue to comply with your duties as a director and avoid steps that could later be portrayed as unfair, such as removing access to systems without a proper basis.
- Take advice early. A solicitor can help you understand your position and make a measured first approach before positions harden.
What rights do shareholders have?
Shareholders own the company but do not run it. Their rights come from the Companies Act 2006, the Articles and any shareholders’ agreement. Statutory rights include the right to:
- vote at general meetings and on written resolutions, in line with their shares
- receive copies of the annual accounts and reports
- inspect the register of members and certain other company registers
- require the directors to call a general meeting, if they hold at least 5% of the paid-up voting capital
- remove a director by ordinary resolution at a general meeting under section 168
- receive dividends once declared, in line with their share rights
Shareholders do not have a general right to inspect the company’s accounting records or to be involved in day-to-day management unless the Articles or a shareholders’ agreement give them that right. That gap is one reason minority shareholders feel shut out.
Resolving a dispute without court
Court action is expensive, slow and public, and it can damage the business everyone is arguing over. Most disputes are therefore resolved in one of these ways:
| Route | How it works |
|---|---|
| Negotiation | Direct discussions, often through solicitors, to agree changes to roles, pay, dividends or governance, or an exit. |
| Mediation | A neutral mediator helps the parties reach their own agreement in a confidential setting. Nothing is binding until a settlement is signed. |
| Negotiated buy-out | One side buys the other’s shares, often using a valuation by an independent accountant. This is the most common outcome of a serious dispute. |
| Expert determination | An independent expert, usually an accountant, decides a specific issue such as the value of the shares. Common where the documents provide for it. |
| Arbitration | A private and binding decision by an arbitrator, governed by the Arbitration (Scotland) Act 2010. Used where the shareholders’ agreement requires it. |
Our mediation and ADR page explains these options in more detail. A sale of the whole company to a third party can also be a clean solution where nobody wants to buy the others out; see our guide to buying or selling a business in Scotland.
Court remedies in Scotland
Where agreement is not possible, the main court remedies are below. In Scotland, company petitions are brought in the Court of Session or, in some cases, the sheriff court. The losing party is usually ordered to pay a share of the winner’s legal costs, known in Scotland as expenses.
Unfair prejudice petition
Under section 994 of the Companies Act 2006, a shareholder can petition the court on the ground that the company’s affairs are being, or have been, conducted in a way that is unfairly prejudicial to their interests as a member. Typical examples are exclusion from management in a company run like a partnership, excessive pay for the majority, diversion of business and persistent failure to pay dividends while profits are extracted in other ways.
If the petition succeeds, the court can make any order it thinks fit under section 996. In practice, the most common order is for the majority to buy the minority’s shares at a fair value, and in a company run on a partnership-like basis that value is often assessed without a discount for holding a minority stake.
Derivative proceedings
Where a wrong has been done to the company itself, for example by a director in breach of duty, the proper claimant is the company. If the board will not act, a shareholder can raise derivative proceedings on the company’s behalf. In Scotland these are governed by sections 265 to 269 of the Companies Act 2006, and the shareholder must first obtain the court’s permission. Any money recovered goes to the company, not the shareholder.
Winding up on just and equitable grounds
As a last resort, a shareholder can petition for the company to be wound up on the ground that it is just and equitable to do so, under section 122(1)(g) of the Insolvency Act 1986. This is usually reserved for cases where trust has completely broken down in a small company and no other remedy is adequate. Courts are reluctant to make the order where a fair buy-out offer has been made.
Before raising proceedings, our commercial litigation team will give you a candid view of your prospects, likely costs and timescales.
Deadlock in 50/50 companies
Equal shareholders are particularly exposed, because neither can outvote the other and the company can grind to a halt. Well drafted documents deal with this in advance, for example through a chair’s casting vote at board meetings, referral to mediation or an expert, or a buy-sell clause that lets one shareholder trigger a sale of their shares to the other or a purchase of the other’s shares. Without such provisions, the options are negotiation, an unfair prejudice petition or, ultimately, a winding up.
Preventing disputes
Most of the disputes we see could have been resolved far more quickly if the documents had dealt with them. A shareholders’ agreement and tailored Articles should cover decision-making, dividend policy, what happens when someone leaves, how shares are valued and how deadlock is broken. If you already have a dispute, our shareholder and partnership dispute solicitors can help, and if you are setting up a new company, now is the time to get the documents right. Related issues on exits are covered by our business succession planning team.
Frequently asked questions
Can the majority shareholders force me out of the company?
Not simply because they hold a majority. They can remove you as a director by ordinary resolution, but they can only compel you to sell your shares if the Articles or a shareholders’ agreement allow it, for example under leaver or drag along provisions. Removing someone from a company run like a partnership may itself give grounds for an unfair prejudice petition.
How are shares valued in a dispute?
Usually by an independent accountant, using the method set out in the Articles or shareholders’ agreement if there is one. Where a court orders a buy-out, it decides the valuation date and basis, and in a partnership-like company it will often value the shares as a proportion of the whole company without a minority discount.
How long does an unfair prejudice petition take?
Contested petitions can take a year or more to reach a final hearing, which is one reason most cases settle along the way, often through a negotiated buy-out.
Can I stop the other shareholders doing something while the dispute continues?
In urgent cases, the court can grant interim interdict to stop specific conduct, such as the transfer of company assets, while the dispute is resolved. You need to act quickly and show a strong case.
Does a shareholder dispute affect my employment with the company?
It can, but your rights as an employee are separate from your rights as a shareholder. If you are dismissed or your role changes, take advice on both aspects together, because tribunal time limits are short.
Involved in a shareholder dispute?
Our dispute solicitors act for majority and minority shareholders across Scotland, aiming for a commercial resolution first and taking firm action where it is needed. Call 0141 471 9166 or book a free consultation.
Related services and guides
This guide reflects Scots law as at October 2026. It is general information rather than legal advice, so please speak to us about your own situation before taking any steps.