Shareholders play an essential role in supporting a business. They can help drive growth and form new business connections. Every shareholder wants the company to succeed. However, they can sometimes have differing views, which may lead to harmful disputes.
Common examples of shareholder disputes
Although financial matters or differences in shareholder compensation are likely reasons behind disagreements, these are not the only possible sources of contention. Different issues can lead to shareholder disputes, including:
- Differences of opinion over company direction
- Mismanagement of assets or information
- Disagreement over voting rights
- Breach of shareholder agreement
- Conflict of interest
Practical solutions to conflicts between shareholders
Allowing a dispute between two shareholders or one shareholder and the company to stay unresolved can potentially harm your business. It may escalate to involve more people or lead to litigation.
Reviewing the shareholder agreement is the ideal place to start when dealing with disputes. The agreement generally outlines compensation, voting rights and other common sources of conflict.
Shareholder agreements serve as a helpful guide in addressing disputes that might arise. Other solutions for handling potential shareholder disputes include:
- Negotiating with the parties in private
- Setting up a mediation between shareholders
- Calling a meeting with all shareholders to discuss issues and propose a resolution
- Terminating the shareholder agreement for one or all involved parties
- Arranging share buyback, either by the company, another shareholder or a third party
Prevent disputes with well-crafted shareholder agreements
The best method of resolving disputes will depend on the people involved and the type of problem that arises. Having a well-crafted shareholder agreement may prevent most kinds of shareholder disputes.
Contact an experienced business law attorney to help you draft shareholder agreements to prevent future conflicts. A business litigation lawyer may also assist you in resolving any disputes that end up in court.
