In the company arena, it may be that directors or shareholders take the view that another director is not running the company advantageously or in accordance with his duties or a shareholder may consider that the company in being run in a way that is unfairly prejudicial to his interest.
In the partnership arena, one partner may feel that another is not contributing to the partnership either in terms of time or financial returns.
In the joint venture arena, one company may take the view that another is not performing its obligations under the venture.
Where there are documents in place regulating the relationships, one party may seek to rely on any contractual provisions contained therein and the other party will be unable to argue the lack of provisions, although he or it may say there is no breach. Where there are no documents regulating the relationship, the parties will likely seek to argue an oral agreement or imply matters which have been agreed. This inevitably leads to disagreement.
Whether or not there is a Director’s Service Contract, which will set out the Directors duties, obligations and rights; a Director should always act in the best interests of the company, must not compete with the company and must not seek to make a secret profit from the company. In addition to director’s duties which may be included in a company’s Articles, there are Statutory Duties set out at Sections 170 to 177 of the Companies Act 2006. If a director does not act within these bounds then the Shareholder’s/Company may seek to remove a director from his position and if the company has suffered loss (for example because the director has competed and made a secret profit), the company can sue the director to recover the monies.
In the absence of a Director’s Service Contract or Shareholder’s Agreement restricting/preventing a Director or Shareholder from competing with the Company (“restrictive covenants”), the company will not be able to prevent a director from competing with a company once he has been dismissed. See further, [link to Restrictive Covenants FAQ in commercial drafting page].
In the absence of a Partnership Agreement setting out the duties, rights and obligations of the partners, then the partnership is governed by the ancient Partnership Act 1890. This regulates how a partnership will be run, including the expulsion of a partner and the termination of the partnership. If there is a Partnership Agreement, this should contain provisions regulating the partnership and how matters of dispute are to be dealt with. We can advise you as to your options either under any partnership agreement or under the terms of the partnership act 1890. If the relationship has not irrevocably broken down we would invite your partner to improve his performance but if you feel that the relationship has broken down or there is no improvement we would seek to bring the partnership to an end, ideally on agree terms in the first instance, and only resort to litigation if this was not achievable.
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