A three way shareholder dispute was referred to us by a solicitor. Two brothers and a third party had set up an internet trading business; all were shareholders and directors. There was, of course, no shareholder agreement. In the inevitable falling out, legal bills started to mount. By the time we were instructed, the arguing had gone on for a year. The third party had been dismissed as a director but there was no resolution of the dispute in sight.

One option could have been to petition for a compulsory winding up, but this would have destroyed any value in the company, and was not an attractive option.

The company traded from a small warehouse in Cheshire. The stock was of limited value (after two poor summers, the largest boxes of stock were children’s trampolines) and the basis of the business was the directors’ contacts with other trading companies. There was no secure market, no supply contracts and no barrier to entry to any competitor.

The minority shareholder wasn’t happy with the offer he had received – he believed the business was worth £300,000. He instructed an expensive firm of Manchester accountants to carry out a valuation, although two valuations (the most recent at £75,000) had been done during the period of the dispute.

The company’s internet trading was made possible by a credit card facility. The bank only granted the facility on the basis of a director’s guarantee. The director threatened to withdraw his guarantee. The company would have been unable to trade and become insolvent. The two remaining directors were able to place the company into administration. The value of the company was clear; two valuations were available. The directors bought the business at a fair value, regaining control.