Shareholder Disputes: What You Should Know

Shareholder disputes or partnership disputes happen for a variety of reasons and sometimes litigation is the only solution. It’s important to understand what your legal rights are in these situations and what options for litigation and settlement are available.

Shareholder disputes or partnership disputes can occur for many reasons such as disagreements over whether to expand a company, what direction a shareholder or partner sees the company going, conflicts of interest, poor interpersonal relationships, the poor performance or lack of performance on the part of one shareholder, and many other reasons.

Shareholder Agreements and Partnership Agreements

Many companies have shareholder agreements or partnership agreements outlining what each shareholder/partner can do in a multitude of different situations if disputes arise. Disputes within companies can take precious time and focus away from running the business. Many shareholder or partnership agreements have precautions in place to try to resolve issues quickly and efficiently. Either they use mediation, where a neutral third party enters to resolve issues, or if the matter is too great, they mandate litigation or arbitration, or they have measures in place to let the shareholder depart from the company. If these agreements are vague, however, shareholders or partners resort to litigation.

Types Of Shareholder or Partnership Disputes

• Traditional shareholder disputes
• Appraisal proceedings
• Merger and acquisition disputes
• Transactional and securities litigation
• Fraud
• Real Estate Disputes
• Noncompetition and contract disputes
• Business dissolution proceedings

Ways Shareholders or Partners Can Protect Themselves

1. Are there additional methods to resolve the matter? Can you understand the other parties’ side? Seeking professionals to assist and guide you through the dispute and the litigation process may prove extremely beneficial and cost effective. Additionally, court cases are also platforms where one party could air another party’s personal dirty laundry.
2. Have you read through your entire agreements and taken the correct steps? Sometimes mediation is prerequisite in the agreement before seeking litigation. Failure to comply with the agreement could lead to problems in court.
3. In that same vein, you could try to negotiate first. Go into the dispute with an open mind. If negotiation can be reached then the company and shareholders will not be stressed with trying to work out the deals and process for buying the shares of the shareholder leaving. The shareholder in dispute will be able to stay and the board can work through the disagreements.
4. You can settle the dispute by offering to buy out the aggrieved shareholder or partner.
5. It’s extremely important to act early and seek professional advice. The person who acts first may sometimes have the advantage in these types of cases.