Shareholder rights: key legal remedies for minority shareholders in the UK

23 May 2025 | posted in Corporate and business law

This insight is part of our Legal Business News | Spring 2025 series. Explore the full series at the end of this piece.

Minority shareholders in UK companies often face challenges when those in control act in ways that undermine their interests. Although companies are separate legal entities, UK law offers several remedies that allow minority shareholders to protect their rights and seek redress.

Here, we outline three key legal avenues available to minority shareholders in UK companies: unfair prejudice petitions; derivative claims; and winding-up petitions on just and equitable grounds.

Three legal remedies for minority shareholders in the UK

1. Unfair prejudice petitions – section 994 of the Companies Act 2006

Unfair prejudice petitions are the most used remedy for minority shareholders. Under section 994 of the Companies Act 2006, a shareholder can apply to court if the company’s affairs are being conducted in a way that is unfairly prejudicial to their interests.

Common situations include:

Exclusion from management or decision-making (especially in quasi-partnerships);
Misuse of company assets by directors;
Unjustified withholding of dividends;
Breaches of legitimate expectations, such as the right to participate in running the business.

If the court finds that unfair prejudice has occurred, it has broad discretion in granting remedies. Typically, it may order the majority shareholders to buy out the minority’s shares at a fair value, often with an added premium to reflect the mistreatment.

2. Derivative claims – section 260 of the Companies Act 2006

A derivative claim allows a shareholder to take legal action on behalf of the company when wrongs have been done to it (usually by directors), especially when those in control are unwilling to act.

Key points include:

The claim is made in the company’s name, not the shareholder’s;
It usually involves allegations, such as director misconduct or misappropriation of assets;
The court’s permission is required early on, ensuring that the claim benefits the company overall.
This remedy is particularly valuable when internal governance has broken down, or conflicts of interest prevent the company from addressing wrongdoing.

3. Just and equitable winding-up – section 122(1)(g) of the Insolvency Act 1986

This is the most drastic remedy and effectively brings the company’s existence to an end. It is used only in extreme cases, under section 122(1)(g) of the Insolvency Act 1986.

Situations that may justify such a petition include:

Complete breakdown of trust in a quasi-partnership;
Management deadlock;
Failure of the company’s fundamental purpose;
Exclusion from management contrary to initial agreements or expectations.

Courts are generally reluctant to wind up companies that are still solvent and operational, but will do so when no other remedy would be fair.

Help from the experts

Minority shareholders in the UK have access to robust legal remedies to protect their interests. Whether through unfair prejudice claims, derivative actions or even winding-up petitions, the law offers tools to address corporate abuse or exclusion. However, each option comes with its own complexities, and early legal advice is essential to choose the most effective path.

Please contact us if you would like more information.

This article is provided for information purposes only. It does not constitute legal advice and should not be relied on or treated as a substitute for specific advice relevant to particular circumstances.