There are many things that can keep a business from succeeding, but one of the most regrettable is shareholder disputes. Anybody that has a stake in a company should want company management to focus on its objectives, but differences in opinions can quickly get out of hand and lead to expensive legal bills and deferred growth. Preventing shareholder disputes through comprehensive shareholders’ agreements is always the best approach – crafting a solid method of resolving disagreements when the company is first established heads off the majority of conflicts and provides a relatively straightforward off-ramp. For those who have not taken the step, or who find themselves amidst a dispute despite an existing agreement, here are some helpful strategies.
- Make sure that you keep thorough, detailed records of all decisions. The more documents you have in place, the more easily you can communicate intentions and clarify misunderstandings.
- Mediation is one of the most effective methods of addressing shareholder disputes. A skilled mediator will be able to communicate between all parties, calming the waters and helping to resolve the issues diplomatically and in a way that will allow those involved to walk away feeling that they have been heard and that their concerns have received recognition and an appropriate response.
- Shareholder disputes are often a result of a specific group of activists voicing their specific concerns. Reaching out to these groups early to understand their values and goals can often lead to steps that achieve quick resolution to animosity.
- Arrange a buyout of shares by another shareholder or external buyer in keeping with any existing shareholder agreements.
- Hold a general meeting of shareholders in order to address the issue and vote on a resolution.
- Bring in a neutral decision-maker, such as a board advisor, to review the conflict and provide a solution.
- If all else fails, litigation may be necessary. Though shareholders can file suit individually if they have been personally damaged, shareholder disputes often allege damage to the company itself. In these cases it is not uncommon for a derivative claim to be filed. Derivative claims are useful when a corporate officer or director has done something wrong but the company refuses to take action. Though proceeds of a successful derivative claim go back to the company rather than to the shareholder that filed the claim, it can effectively end a shareholder dispute.
If you need assistance in resolving a shareholder dispute or in crafting an effective shareholder agreement, we can help. Contact us today to set up a convenient time to meet and discuss your situation.