Make 2026 the year of certainty: How UK SMEs can avoid litigation pitfalls
Prevention is always better than cure.
A new year brings fresh opportunities – and for business owners, it is the perfect time to take stock and make sure your company puts in place strong legal protection against the unexpected. Unfortunately, disagreements can arise when you least expect them, and they can easily turn in to disputes. For SMEs, the impact of a dispute on business operations and finances can be significant.
Since opening our Altrincham office in June 2025 – alongside our established presence in Chester and Liverpool – our expanded Commercial Litigation team has been helping businesses across Cheshire and Greater Manchester navigate complex disputes with confidence. This includes handling shareholder disputes claims against directors, professional negligence, contractual disputes (B2B and B2C), and insurance policy challenges.
Through direct experience, we know prevention is always better than cure.
So, as you plan for the year ahead, here are my top five tips to help safeguard your business from potentially costly and lengthy litigation in 2026:
1. Review your Shareholder Agreements and Articles of Association
These two documents are the backbone of your company’s governance. If they are missing, outdated, or unclear, you are leaving the door open for disputes when circumstances change. As often they do. Make sure your Shareholder Agreement and Articles of Association set out roles, responsibilities, exit strategies, and dividend policies. As every business is different we would not recommend a ‘one-size-fits-all’ approach for contracts, agreements, policies or any other legal documentation. Our specialist corporate law team are experts in this area.
2. Understand your directors’ duties
Directors’ duties are personal obligations that can carry serious consequences if breached. Under the Companies Act 2006, directors must act in good faith, promote the success of the company, avoid conflicts of interest, and exercise reasonable care, skill, and diligence.
If a business faces financial difficulty or insolvency, directors’ duties shift to prioritising creditors. Failing to shift priorities can result in personal liability – which is costly and stressful to manage, especially when your own assets are at risk.
Practical tip: Keep detailed board minutes, document decision-making processes, and seek legal advice early if your company is under pressure. It is not just good governance – it is your best defence to reduce risk and the potential of a situation escalating.
3. Do not overlook succession planning
For many SMEs, leadership and ownership are closely tied to a few key people. If something unexpected happens – retirement, illness, or a sudden exit – lack of a clear succession plan can lead to disputes and instability. From our experience this can have a devastating effect on employees and operations, preventing the business from moving forward as intended.
Make sure you have agreements in place for what happens if a key person leaves or is unexpectedly out of the business for any reason, and consider how roles and responsibilities will transition or transfer. A well-thought-out plan protects the business by reducing risk, and can avoid emotive conflicts at a critical time.
4. Tighten your contracts
Unfortunately, we know from direct experience that ambiguous contracts are one of the biggest drivers of litigation. Melissa explains:
“We recommend avoiding vague terms and informal agreements. Ensure your contracts cover termination rights, payment terms, and dispute resolution clauses. A little clarity now can save a lot of stress and legal fees later.”
5. Check your insurance coverage
Do not assume your policy covers everything. Ask your insurance broker to review exclusions and limits regularly – and don’t wait until you need to make a claim to find out what is missing. Recently, we assisted a client with a commercial dispute which arose because there had been a disagreement over whether the reinstatement value of the commercial premises had been properly communicated by the insured to the insurer.
When the premises were severely damaged by fire, the insurer sought to limit the amount it was willing to pay under the policy, leading to a significant dispute. We negotiated terms of settlement for the insured so the business could continue with its plans without further disruption.
Reducing the effects of commercial litigation
Litigation can be disruptive and expensive – but with the right safeguards in place, you can reduce the risk of and protect your business. Also, with mass litigation on the rise in the UK, avoiding litigation pitfalls is a sound business investment.
Why does this matter for SMEs?
Because collective actions are no longer confined to big corporates or sectors like banking – they are spreading into areas such as digital services, manufacturing, and life sciences. These cases often involve third-party funders and claims management companies, creating significant financial and reputational risks even for smaller businesses.
For UK SMEs, which typically have tighter margins and less legal resource, the uncertainty and cost introduced by mass litigation can derail growth plans and investment strategies.
If you’d like to discuss how these tips apply to your business, or review your risk exposure, we would love to help. At no cost to you, contact us for a no-obligations conversation:
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Expanding litigation and dispute resolution team
Their arrival strengthens HM3 Legal’s already well-established Resolution and Recoveries services, which operates across Liverpool, Chester and now South Manchester following the firm’s recent expansion into Altrincham.
Lindsey Kidd, Managing Director at HM3 Legal, commented:
“This is a team with not only top-tier technical ability, but also the drive, energy and commercial awareness our clients value. Melissa, Jo and Sarah are a brilliant addition to our growing litigation team — they reflect our values and bring the kind of experience and mindset that fits perfectly with our way of working. We’re proud to be attracting this calibre of talent as we continue to grow with purpose.”
With the new team in place, HM3 Legal now offers clients a broader and deeper litigation service across the region, delivering commercially focused, solution-led advice across all stages of a dispute.
