Understanding your options when navigating shareholder disputes


4 min

Is your client an aggrieved (or minority) shareholder? How you can be heard.

Shareholder disputes are a common occurrence, arising from various sources of conflict such as breaches of directors' duties, oppression of a minority shareholder, financial mismanagement, and disagreements over corporate strategy. These disputes can pose significant challenges for shareholders. However, aggrieved shareholders have several options available to address their concerns and protect their interests.

Understanding shareholder disputes

At Worrells, we often see shareholder disputes resulting from breaches of fiduciary duties, unfair prejudice, breakdowns in relationships, or unworkable corporate structures. These disputes can lead to tensions among shareholders, creating obstacles to effective corporate governance and decision-making.

Options for aggrieved shareholders


  1. Negotiation and mediation
    In many cases, disputes can be resolved through negotiation and mediation. Engaging in constructive dialogue with other shareholders can often lead to quick and cheap resolutions. This may include a compromise, or decision making delegated to a third party (where a deadlock cannot be resolved between the disputing parties). Shareholders may also attend mediation with the involvement of an experienced (sometimes, Court appointed) mediator.

  2. Shareholder agreements
    Shareholder agreements can serve as valuable tools for preventing and resolving disputes. These agreements outline procedures for dispute resolution, such as arbitration or mediation clauses, and mechanisms for addressing issues including share transfers, management changes, or deadlock situations.

  3. Seeking legal advice
    Shareholders may require legal advice from lawyers specialising in shareholder disputes. A legal professional can assess the situation, advise on rights and obligations, and recommend the most appropriate course of action.

  4. Applying to the court
    When negotiation and mediation fail to result in a satisfactory outcome, aggrieved shareholders can resort to legal action by applying to the court. This may involve seeking remedies such as injunctions, orders for specific performance, damages for breaches of directors' duties, or winding up the company on just and equitable grounds, which is discussed in further detail below.


Winding up on just and equitable grounds

Winding up a company on just and equitable grounds is a legal remedy available when internal disputes or breakdowns make the company's continued operation untenable. Section 461(1)(k) of the Corporations Act (2001) (Cth) (Act), can be utilised in cases where the company can no longer properly function as a result of a shareholder dispute.

The process of winding up a company on just and equitable grounds involves the following steps:

  1. Application to the Court
    A shareholder (or group of shareholders) must apply to the court for an order to wind up the company on just and equitable grounds. This application is usually made to the Supreme Court or the Federal Court of Australia, depending on the jurisdiction and circumstances of the case.

  2. Evidence and arguments
    The applicant(s) must provide evidence and arguments to support their claim that winding up the company on just and equitable grounds is necessary and appropriate. This may involve presenting documents, witness testimony, and legal arguments to substantiate allegations of unfair prejudice or breakdown of trust and confidence.

  3. Court decision
    The court will consider the evidence and arguments presented by both parties before making a decision on whether to grant the winding-up order. If the court is satisfied that there are sufficient grounds for winding up the company on just and equitable grounds, it will issue the relevant orders to commence the winding-up process.

  4. Appointment of Liquidator
    Upon granting the winding-up order, the court will appoint a liquidator (such as Worrells) to oversee the winding-up process. The liquidator's role is to realise the company's assets, settle its liabilities, and distribute any remaining funds to creditors and shareholders in accordance with the Act.

At Worrells, our team of corporate insolvency and restructuring professionals understands the intricacies of shareholder disputes and are experienced winding up a company’s affairs to provide a fair and efficient resolution, in the event that a shareholder dispute cannot be resolved. 

Key takeaways

Shareholder disputes in Australia present complex challenges that require careful navigation and consideration of available options. Whether through negotiation, legal action, or alternative dispute resolution mechanisms, aggrieved shareholders can seek to address their grievances and protect their interests.

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