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Title: The effectiveness of shareholder dispute resolution in private companies under UK companies legislation : an evaluation
Author: Iqbal, Muhammed Asim
ISNI:       0000 0004 2678 3533
Awarding Body: Nottingham Trent University
Current Institution: Nottingham Trent University
Date of Award: 2008
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The aim of the research is to evaluate the effectiveness of the legal means of resolving shareholder disputes in private companies. The principal means are ex ante contracting in shareholders' agreements and court-based dispute resolution mechanism in sections 994-996 of the Companies Act 2006. Private companies are often formed on the basis of mutual trust deriving from personal relationships between shareholders. The breakdown of these relationships termed 'relational breakdown' commonly precipitates squeeze-out behaviour that causes disputes over the terms of exit. Ex ante contracting in shareholders' agreements cannot eliminate the underlying factors that cause relational breakdown, but can only mitigate the effects of relational breakdown by qualifying the powers of the majority and providing an exit to the minority on fair terms. Moreover, due to a range of limitations associated with ex ante contracting in shareholders' agreements, shareholders need recourse to a legal mechanism such as sections 994-996 of the Companies Act 2006 (formerly sections 459-461 of the Companies Act 1985) to resolve their disputes. In a Consultation Paper and subsequent Report published in October 1997 the Law Commission criticised the length, cost and complexity of proceedings under these provisions which were said to diminish their effectiveness as a tool for resolving shareholder disputes. After the Law Commission Report there have been significant developments both in terms of substantive law and procedure which have sought to streamline the remedy and make it more effective. The present research is the first attempt to consider from a legal perspective the effectiveness of sections 994-996 of the Companies Act 2006 as a court-based dispute resolution mechanism, in the decade since the Law Commission produced its Report on shareholders' remedies. The research draws extensively on empirical evidence derived from a series of semi-structured interviews that were carried out with fifteen barristers experienced in this area of work. It concludes that (i) substantive law developments have enhanced legal certainty in the area and influenced shareholders to settle early; (ii) procedural developments, in particular, the use of mediation, has also contributed to earlier settlement; and (iii) in sum these developments have improved the effectiveness of these proceedings for shareholders,companies and the administration of justice by the courts.
Supervisor: Not available Sponsor: Not available
Qualification Name: Thesis (Ph.D.) Qualification Level: Doctoral
EThOS ID:  DOI: Not available