Introduction: Why Preparation Matters

Shareholder disputes can paralyze decision making, distract management, and destroy value. They also strain relationships in family businesses and early stage ventures where trust is critical. Good preparation helps you separate the legal questions from the commercial ones, preserve evidence, and clarify your desired outcome before you see a lawyer. Prepared clients save time and cost and often unlock settlement possibilities early.

In Nigeria, the Companies and Allied Matters Act 2020 provides remedies where company affairs are conducted in a manner that is unfairly prejudicial to a shareholder or a class of shareholders. Many common law jurisdictions have similar protections. Knowing how these protections interact with your Articles and any Shareholders’ Agreement will guide your next steps.

Steps You Can Take Before Seeing a Lawyer

1. Diagnose the issue precisely

Write a short note describing the problem, who is involved, the dates, and why it matters. Typical triggers include refusal to declare dividends, exclusion from management, information blockages, issuance of new shares that dilute a class, or allegations of misuse of company assets.

2. Read the governing documents

• Articles or Constitution – voting thresholds, director appointment and removal procedures, quorum rules, share transfer restrictions, meeting notices, and dispute provisions.
• Shareholders’ Agreement – pre-emption rights, tag-along and drag-along clauses, funding commitments, deadlock mechanisms, buy-sell or option triggers, ADR clauses.
• Board and members’ resolutions – verify what was validly approved and whether notice and quorum requirements were satisfied.

3. Preserve evidence and the information trail

Keep copies of meeting notices, agendas, minutes, financial statements, bank mandates, and correspondence. Export chat threads where board or shareholder business was discussed. Do not alter or delete records. Back up your files to a secure drive.

4. Use internal steps first where available

If the Articles or Agreement prescribe internal escalation, follow it. Examples include referral to the board chair, an independent director, a governance committee, or mandatory mediation. Decision makers and courts respect parties who honor agreed procedures.

5. Engage respectfully and constructively

Propose an agenda driven meeting or a confidential mediation. Consider a short standstill agreement that pauses hostile steps while settlement is explored. Keep communications professional and focused on solutions. Avoid threats or inflammatory language.

6. Protect the business and your duties

Ensure filings continue, taxes are paid, and approvals for significant transactions are obtained. If you are a director, continue to act with care and in good faith toward the company. Avoid actions that look like asset stripping or sabotage.

Evidence and Documents to Gather

Bring clean, legible copies. Organize them chronologically and label each item. A neat bundle helps your lawyer quickly assess strengths, weaknesses, and strategy.

Corporate and ownership records

• Incorporation documents, Articles or Constitution, amendments, CAC filings.
• Register of members, share certificates, share transfer forms, option or subscription agreements.
• Shareholders’ Agreement and side letters, cap table snapshots, vesting schedules.
• Minutes and resolutions of board and general meetings, notices and proof of delivery, attendance records, and proxies.

Financial and operational trail

• Audited accounts, management accounts, bank statements, dividend records, loan or director advance agreements.
• Contracts with customers and suppliers, related party transactions, approvals, and internal control policies.

Communications and compliance

• Emails, letters, and chat messages showing proposals, objections, approvals, or promises.
• Regulatory correspondence and filings where relevant.

Documents to gather – checklist

• Articles or Constitution and all amendments.
• Shareholders’ Agreement and any side letters.
• Register of members, cap table, share certificates.
• Board and members’ minutes and resolutions for the last 3 years.
• Audited accounts and management accounts for the last 3 years.
• Key contracts, bank mandates, and evidence of approvals.
• All correspondence relating to the dispute, including chat exports.

Common Mistakes Clients Make

• Sending angry, accusatory messages that become exhibits against you.
• Taking company assets or funds without proper authorization.
• Refusing legitimate inspection requests or altering records.
• Ignoring ADR or escalation clauses and rushing to court prematurely.
• Assuming majority power has no limits or that minority has no voice.
• Letting tax filings, statutory returns, or audits lapse during a dispute.

Common Misconceptions

• “Majority can do as it likes.” Majority decisions must follow law, Articles, and duties to act for proper purposes and in good faith toward the company.
• “Minority has no remedies.” Minority shareholders can seek relief where conduct is unfairly prejudicial, including orders to regulate company affairs or compel a buyout.
• “Court is the only route.” Mediation and arbitration often deliver faster, confidential, and more commercial outcomes.
• “Verbal assurances are enough.” Documentary proof carries the most weight. Keep a tidy paper trail.

Preparing for the Consultation

What to organize

• A concise timeline with key dates and decisions.
• Clean copies of governing documents, minutes, and resolutions.
• A short statement of objectives: remain and fix governance, negotiate an exit with fair valuation, or enforce rights.

Questions to ask your lawyer

• Which remedies are realistic for my shareholding and facts.
• Procedural steps and timing for mediation, arbitration, or court.
• Interim measures available to preserve the status quo or prevent asset dissipation.
• Share valuation approaches and how a buyout or settlement could be structured.
• Estimated legal budget and cost control options.

Setting expectations

• Outcomes are fact sensitive and document driven.
• Many disputes settle after a credible pre action letter or mediation session.
• Litigation or arbitration may require staged processes and interim applications.

Practical Insights and Strategy Options

Governance fixes that calm disputes

• Define reserved matters that require supermajority approval.
• Add an independent director trusted by both sides.
• Adopt information rights and a quarterly reporting calendar.
• Document decision making flows to reduce ambiguity.

Buyout and exit mechanisms

• Pre emption rights and right of first refusal to keep shares within the pool.
• Tag along and drag along rights to align exit paths.
• Buy sell triggers or Texas shoot out style clauses to break deadlock.
• Independent valuation with a clear methodology and cut off date.

ADR before court

Mediation can surface creative options like phased buyouts, earn outs, governance reforms, or compensation tied to performance. Arbitration offers confidentiality and expert adjudication where your agreement contains an arbitration clause.

Special Situations

Family businesses

Blend legal solutions with family governance. Consider a family council, shareholder charters, and succession plans. Put sensitive decisions in reserved matters to avoid repeated flashpoints.

Start ups and investor rounds

Conflicts often arise around dilution, vesting, board seats, and liquidation preferences. Keep your cap table clean and ensure issuances followed due process. Disclose side letters to avoid surprise rights.

Deadlock companies

Where ownership is split evenly, deadlock provisions are essential. If absent, parties can adopt a tailored deadlock deed with staged escalation, expert input, and buy sell outcomes.

Foreign shareholders

Check investment registrations and exchange control formalities. Cross border enforcement and recognition of awards affect strategy and leverage. Consider seat of arbitration and place of enforcement when drafting or invoking ADR clauses.

Frequently Asked Questions (FAQs)

1. Can I force another shareholder to sell their shares.

Only if the Articles, a shareholders’ agreement, or a court or arbitral order provides for it. Otherwise, negotiate or seek remedies that indirectly achieve a buyout, such as orders regulating affairs or compulsory purchase where justified.

2. What if meetings are not being called or minutes are not kept.

Members can requisition meetings in line with corporate law and the Articles. Defective meeting practice can be challenged. Seek advice before acting to ensure notices and quorum rules are respected.

3. Can a minority block a new share issue that dilutes them.

They may object where the purpose is improper or oppressive. Pre emption rights and proper process are key. Evidence of purpose, alternatives, and fairness will be important.

4. Is arbitration better than court for shareholder disputes.

It depends on your agreement, need for confidentiality, urgency of interim measures, and enforcement considerations. Many disputes settle after a firm pre action letter or a structured mediation.

5. How are shares valued in a buyout.

Parties often appoint an independent valuer and agree on EBITDA multiples, discounted cash flow, or a hybrid approach. Adjustments may strip out the impact of oppressive conduct and exclude minority or control premiums where appropriate.

6. Can directors who sided with one faction be removed.

Yes, if the Articles and law permit, following correct notice, voting thresholds, and filings. Removal that breaches procedure risks being set aside and may create liability.

Final Thoughts

Approach shareholder conflicts with discipline and documentation. Define the problem precisely, preserve evidence, follow internal steps, and map commercial outcomes you can live with. Early legal advice supported by a well prepared bundle often unlocks settlement options that protect value and relationships. Where settlement is not possible, preparation positions you for robust litigation or arbitration.