March 1, 2024

Director vs. Stakeholder: A Legal Battle Over Corporate Control

Disagreements between company directors are common in any business. If not addressed swiftly, they can cause substantial damage to a firm. If one or more of the directors are also stockholders, resolving the conflict can be more difficult without the help of a dispute resolution lawyer in Perth.

Directors’ disputes can emerge for various reasons, including arguments regarding a company’s management, direction, and future or simply the relationship breakdown. This post will discuss your options for dealing with a director conflict while minimising the damage to your organisation.

Negotiate and Mediate

It is important to act promptly when the ideas of different directors clash. The first step should always be to address the internal conflict within the organisation. It would help if you used typical alternative dispute resolution tactics, such as negotiation and mediation or requested help from business dispute lawyers in WA.

You should open lines of communication and propose a meeting to discuss the following:

    • Prepare a list of particular issues or concerns, and
    • Urge all parties to share their ideal solutions.

To ensure a planned and effective discussion, prepare a plan of action and meticulously record the meeting’s conclusion. If early negotiations are unproductive, consider bringing in a neutral third party to help with the resolution process.

Furthermore, you may want to get legal advice on your position and the potential consequences of the dispute. A dispute resolution lawyer in Perth can thoroughly grasp the situation and your available solutions.

Shareholder Solutions

Depending on the size of the organisation, directors may also be shareholders. If this is the case, a shareholders’ agreement may specify how shareholder or director disagreements will be resolved. It is critical to check your shareholder’s agreement to determine if it contains instructions on director dispute resolution methods, decision-making procedures, and director removal.

For example, a shareholders’ agreement could include:

    • Directors or stockholders that breach their duty may face penalties or
    • A resignation or buyout process.

Importantly, a shareholders’ agreement may allow a director to be removed if they violate certain agreement sections. A breach can be:

    • Consider investing in or advising a competitor,
    • Establishing a competing business or
    • Stealing money or intellectual property from the company.

These conditions establish a disciplined framework for dealing with director disagreements, ensuring that the company’s interests are protected and that actions that harm the business have clear consequences.

Resign or Sell Up

If the conflict cannot be settled amicably, consider resigning from the directorship. Several circumstances, including the company’s financial performance, will determine whether you can do so.

If you are a shareholder, consider selling your shares and quitting as a director. The company’s constitution will specify the conditions under which this can occur. To maintain openness and fairness, it is best to hire a third-party appraiser or business settlement lawyers in Perth to appraise the company so that you have an exact estimate of the value of your shares if necessary.

On the other hand, you could explore buying out the other stakeholders while remaining in the company. This strategy may resolve the conflict while allowing you to continue to be actively involved in the company’s operations.

Voluntary Administration

In rare situations, disagreements between directors or shareholders can be so severe that the only choice is to put the firm into voluntary administration. This choice will be based on:

    • Consider the company’s financial health and
    • Shareholder opinions.

Again, the company’s constitution should include provisions for dealing with this possibility. This process must be done by the company’s internal regulations and legal standards.

Go To Court

If all prior attempts to mediate the dispute have been unsuccessful, you may need to take the case to court with the help of small business lawyers in WA. The sort of judicial proceedings will be determined by:

    • Identify the nature of the disagreement and
    • The necessary remedies.

For example, if another director or shareholder violated their duties or acted detrimental to the firm, you may file a lawsuit against them for damages.

Before pursuing legal action, you should seek legal counsel to confirm your position in any disagreement and your choices. Remember that legal actions are time-consuming and expensive. Furthermore, if you are unsuccessful, you may be required to pay the other party’s legal fees.

Consider going to court as a last resort after all other options for resolving the dispute have failed, as it is expensive and time-consuming.


A dispute among directors may be resolved quickly and simply if the parties communicate clearly and calmly and have an open mind regarding potential solutions. The disagreement may be settled without legal aid if the parties remain open and willing to consider all options.

Taking the above mentioned procedures to mediate the conflict or requesting help from business director dispute lawyers in WA before it worsens is critical. If it does, you can pursue alternative dispute resolution or legal action.