The Court of Appeal has recently upheld a High Court decision rejecting a man’s claim that he was entitled to a 50% share in a retail company, highlighting the risks of relying on informal or verbal business arrangements.

The case serves as an important reminder of the need for clear, written agreements when entering into business relationships.

Background to the Dispute

The company was established in 2014, with the claimant joining the business shortly afterwards. He alleged that he and the company’s director had reached an oral agreement that he would receive a 50% shareholding, although the director would remain the sole registered shareholder until the claimant secured leave to remain in the UK.

The claimant further argued that, following a meeting with the company’s accountant in 2015, steps were to be taken to formalise their status as equal shareholders.

However, no formal documentation was ever produced to support this arrangement.

Breakdown of the Relationship

Several years later, the relationship between the parties deteriorated. When the claimant asserted that he was a shareholder, the director disputed this and maintained that no such agreement had ever been made.

Instead, the director contended that the claimant had only been entitled to a share of the business profits as an employee, not ownership of shares in the company.

High Court Decision

The High Court rejected the claimant’s case, finding that:

• His evidence was inconsistent and unreliable
• There was insufficient evidence to prove the existence of an oral agreement
• The accountant’s evidence did not support his claim

The Court accepted the director’s position that no agreement for share ownership had been made.

Court of Appeal Ruling

The claimant appealed the decision, arguing that key evidence had not been properly considered.

However, the Court of Appeal dismissed the appeal, confirming that:

• The High Court had been entitled to assess the evidence as it did
• There was no clear error in its findings
• The judge’s assessment of witness credibility should not be overturned

The Court reiterated that it would only interfere with such findings where they were clearly unreasonable, which was not the case here.

Key Takeaway: Get Business Agreements in Writing

This case highlights a crucial point for business owners and individuals entering into commercial arrangements:

👉 Verbal agreements are difficult to prove and can lead to costly disputes.

To avoid uncertainty, it is essential to:

• Record agreements in writing
• Clearly define ownership and shareholding structures
• Take legal advice at an early stage

Q&A: Business Agreements and Share Disputes

Can a verbal agreement be legally binding?

Yes, in some circumstances - but proving its existence and terms can be extremely difficult.

Why did the claim fail in this case?

The Court found there was insufficient reliable evidence to prove that any agreement for shares had been made.

What is the difference between profit share and share ownership?

Profit share entitles someone to a portion of profits, whereas share ownership gives legal ownership and control in a company.

How can I protect my position in a business?

By ensuring all agreements are clearly documented and supported by formal legal documents.

When should I seek legal advice?

At the outset of any business arrangement - not after a dispute arises.

Contact Us

If you are involved in a business dispute, or need advice on shareholder agreements, partnerships or commercial arrangements, early legal advice can help protect your interests.

Willett & Co Solicitors provide clear, practical commercial advice to individuals and businesses in Bury St Edmunds and across Suffolk.

📞 01284 701323
✉ law@willettsolicitors.com
📍 18 Angel Hill, Bury St Edmunds, Suffolk, IP33 1XQ