How to fund your shareholder dispute

Shareholder disputes are one of the toughest experiences a business owner can face.  We explain below how you can fight back. We often hear from clients who’ve not only lost their income and role but are also fighting to unlock the value of their shares. To make matters worse, the other directors may be using company money to fund their lawyers while you have been left footing the bill personally.

At Gannons, we specialise in shareholder disputes often acting for the “david” against “goliath”.  The first question is always: how can I afford to pay for the case? In response there are a range of funding and insurance partners to help our clients pursue strong cases without being overwhelmed by legal costs.

We explain below how Litigation Funding (“Funding”), After-the-Event insurance (“ATE”)  and Work In Progress insurance (“WIP”) can help you fight back.  Most cases settle.  Settlement of a shareholder dispute is likely to happen much earlier in proceedings if the other side knows you can carry on running your case and are not forced to let funding defeat you.

Funding the shareholder dispute case

When you’ve been forced out of a company, it’s common to feel that the odds are stacked against you. The other shareholder(s) often pay their legal costs from company funds, while you’re expected to fund yours privately. That imbalance can feel deeply unfair.

However, with the right funding structure, you can pursue your claim with financial confidence. Whether your goal is to secure a fair buy-out of your shares, restore your position or recover unpaid dividends, modern funding solutions can help you stay in the fight.

1. Litigation funding

Litigation funders are specialists that pay your legal costs including the costs for shareholder litigation and valuation of the shares in dispute in exchange for a share of the proceeds if your claim succeeds.

They’ll typically cover in part or in full:

• Solicitors’ and barristers’ fees;
• Expert reports and valuation fees; and
• Court and mediation fees.

If you win, through either an out of court settlement or Court award, the funder receives a pre-agreed share (often between 20% and 40%). If you lose, you don’t repay the funder.

We work with a variety of insurance know what they look for. We can give an honest opinion on how strong if your evidence, what are the realistic prospects of success and realistic amount of recovery.  We can also help you prepare your case for to be put to the insurers for litigation funding approval.

2. After the event – ATE - insurance

Even the strongest cases carry some risk. One of the biggest worries for clients is: “what if I lose and have to pay the other side’s legal costs?”

That’s where after the event ATE insurance comes in. After the event covers your risk of having to pay the opponent’s costs (and sometimes your own costs) if your case doesn’t succeed.

The key advantage? The premium is usually deferred and contingent, meaning you only pay it if you win. If you lose, the insurer pays instead.

For individuals who’ve already lost their salary or income, ATE insurance can provide huge peace of mind and allow you to pursue your rights without fear of financial ruin.

3. Work in progress – WIP - insurance 

We appreciate that not everyone can pay legal fees upfront. That’s where work in progress - WIP insurance (sometimes known as contingent fee insurance) can help.

This insurance allows us, as your lawyers, to take on a portion of the financial risk. It covers the value of our time if the case is unsuccessful, meaning we can offer more flexible fee arrangements, such as:

• Reduced hourly rates with a success-based uplift;
• Deferred billing until the case concludes; or
• Hybrid “no win, low fee” structures.

In short: work in progress insurance helps us act for you now, and get paid later, if and when you win.

Support in deciding how to run your shareholder dispute tatically

Funding and insurance arrangements can be complex, but that’s where our experience makes the difference. We’ve guided many clients through this process, from early case assessment to full resolution, and we know how to present a strong and fundable claim.

At the start we will plan the likely journey.  We will:

1. Assess the strength, value and strategy of your case;
2. Identify funding and insurance options tailored to your situation;
3. Liaise directly with the most reputable funders and insurers in the industry; and
4. Structure your case so you can move forward with confidence and control.

Our aim is simple: to ensure lack of funds won’t mean you are stripped of the value in your shares. 

5. A typical scenario

Take, for example, a director-shareholder who has been removed from the board, cut off from salary, and denied dividends, while the remaining directors increase their own pay.

The shareholder has a strong unfair prejudice claim but can’t afford to take the case forward. 

With Gannons’ help:

• Litigation funding could cover most of the legal costs;
• After the event insurance ATE could protect against losing and paying the other side’s costs; and
• Work in progress WIP insurance could allow us to act on a deferred or success-based fee.

This combination transforms what would otherwise be an impossible case into a viable and potentially winnable claim.

6. Shareholder dispute tactics

Our experience has been drawn from acting for many Section 994 unfair prejudice petitions (this is the legal name for the petition that would be presented to Court) and complex shareholder disputes, often where one party has been excluded from the business.  Our experience has enabled us to build up a specialist practice with a pragmatic understanding of business realities. We can judge how to apply pressure, how to negotiate settlements, and when to escalate matters to Court.