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  3. The Death of a Shareholder and Rights of Action by the Estate

The Death of a Shareholder and Rights of Action by the Estate

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Blogs Dispute Resolution
5 minutes reading time

Shareholder disputes are a common issue in the world of business.

These disputes can arise for various reasons, including disagreements over the company's direction, disputes between shareholders, and issues related to succession planning and the death of a shareholder.

One area of shareholder disputes that can be particularly complex is the area of unfair prejudice and derivative actions.

In this blog, we will explore the legal issues surrounding these types of disputes, the options available to executors of an estate and the estate's ability to bring a claim as a shareholder.

We will also provide a summary of the decision in AMT Coffee Ltd; McCallum Toppin v McCallum Toppin & Others [2019] EWHC 46 (Ch).

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The death of a shareholder and rights of action by the Estate v2

Unfair Prejudice and Derivative Actions

When a shareholder feels that they have been unfairly prejudiced by the actions of the company or its directors, they may be able to bring a claim for unfair prejudice.

Unfair prejudice can occur in several different ways, including:

  • excluding a shareholder from management decisions;
  • refusing to pay dividends;
  • diluting a shareholder's stake in the company; and 
  • failing to follow proper procedures for shareholder meetings.

If a shareholder can demonstrate that they have been unfairly prejudiced, the court may be able to order the company or its directors to take certain actions to remedy the situation.

Derivative actions, on the other hand, allow shareholders to bring claims on behalf of the company against its directors for breach of duty.

This can include claims for breach of fiduciary duties, negligence, or other types of misconduct.

Get In Touch With Our Shareholder Disputes Team

Unfair Prejudice and Derivative Actions

Succession Planning and Death of a Shareholder

When a shareholder dies, it can create several issues for the company and its remaining shareholders.

If the deceased shareholder is a key player in the company, their absence can create a power vacuum that can lead to disagreements and disputes among the remaining shareholders.

In addition, the deceased shareholder's estate may need to be involved in the company's affairs.

If the deceased shareholder had a significant stake in the company, their estate might be entitled to a say in how the company is run.

Speak With Our Shareholder Disputes Solicitors

Succession Planning and Death of a Shareholder

Options Available to Executors of an Estate

If you are the executor of an estate that includes a stake in a company, you will need to consider your options carefully.

One option is to sell the shares in the company, either to the other shareholders or an outside buyer.

Another option is to hold onto the shares and take an active role in the company's affairs.

If you choose to do this, you will need to be prepared to work closely with the other shareholders and the company's directors to ensure that the company is run in a way that is in the best interest of all stakeholders.

Contact Our Shareholder Dispute Experts

Options Available to Executors of an Estate

Estate's Ability to Bring a Claim as a Shareholder

In some cases, the executor of an estate may need to bring a claim against the company or its directors on behalf of the deceased shareholder.

In these cases, the estate will have the same legal rights as the deceased shareholder would have had if they were still alive.

However, it is important to note that the executor cannot bring a claim against the company or its directors for their own benefit.

The claim must be brought on behalf of the company or its shareholders as a whole.

Get In Touch With Myerson Solicitors

Estates Ability to Bring a Claim as a Shareholder

AMT Coffee Limited

This case concerned a shareholder dispute that arose after one of the company's shareholders died.

The deceased shareholder, Mr McCallum-Toppin, had held a significant stake in the company.

His widow had been appointed executor of his estate and became a shareholder in the company due to his death.

The dispute arose when the company's remaining shareholders attempted to remove Mr McCallum-Toppin's widow from the board of directors.

They claimed she had been engaging in detrimental actions to the company and its shareholders.

Mrs McCallum-Toppin disputed these claims and brought a claim for unfair prejudice against the company and its directors.

She argued that she had been unfairly excluded from management decisions and that the other shareholders had been diluting her stake in the company.

The court ultimately found in favour of Mrs McCallum-Toppin, ruling that the actions of the other shareholders had unfairly prejudiced her.

The court ordered her shares be bought out at "fair value" without a minority shareholder's discount since HHJ Matthews considered "A sale at a discounted value would present an undeserved windfall to the purchasing respondents".

This highlights the importance of careful succession planning and estate management in shareholder disputes.

It also underscores the potential complexity of these types of disputes and the need for legal and financial expertise in resolving them.

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AMT Coffee Limited

Conclusion

Shareholder disputes can be a significant source of tension and conflict within a company.

However, with careful planning and management, many of these disputes can be avoided or resolved in a way that is fair to all stakeholders.

If you are involved in a shareholder dispute, seeking legal and financial advice as soon as possible is important.

With the right support and guidance, you can navigate these complex issues and find a path that works for you and your company.

Contact Our Shareholder Dispute Solicitors

Conclusion 2

Contact Our Dispute Resolution Team

Our dispute resolution experts are ready to assist with all aspects of shareholder disputes. We are always happy to have an initial no-obligation chat to help guide you in the right direction. Please do not hesitate to contact us on:

 0161 941 4000