Boardroom disagreements can result in acrimonious disputes between individuals that are particularly acute in small to medium-sized businesses. This is because key individuals are often simultaneously directors and shareholders of the company. These individuals will have an influential role in both the running and ownership of the company.

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Where the relationship irretrievably breaks down between a director and the rest of the board, the company is likely to want to move swiftly to sever its ties with the director-shareholder and achieve a clean break. This would involve terminating their employment, removing them as a director and dealing with any shareholdings or share options they may hold in the company with a view to ending their future influence on the operation of the company.

In addition to employment law claims, the departing director-shareholder may have the right to bring claims in their capacity as a shareholder. Potential statutory claims are an unfair prejudice petition under section 994 of the Companies Act 2006 (CA 2006) and a derivative claim under Part 11 of the CA 2006. Shareholders may also seek to petition for the winding-up of the company under section 122(1)(g) of the Insolvency Act 1986 (IA 1986) (for example, to facilitate an exit where there is deadlock). In addition, there may be rights under the articles of association or shareholders’ agreement in relation to the transfer of the departing employee’s shares.

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