Shareholder disputes can have a negative impact on your business. They can hinder decision-making, reduce business performance and in extreme cases bring your business operations to a halt.
Common causes of shareholder disputes
There are many factors that contribute to a shareholder dispute. Mismanagement of finances, disagreements over business strategies or even simple personality conflicts between shareholders can result in a shareholder dispute.
When you face a shareholder dispute, you need to be ready to handle it promptly and efficiently. Shareholder disputes can be complex and get out of hand quickly, so it is important to address them directly before it affects your bottom line.
Try mediation
First, see if mediation is an option. Mediation is a confidential, neutral process involving a meeting with a mediator who helps shareholders communicate with each other and find mutually agreeable solutions to problems.
Mediation is a great option if you want to preserve business relationships. It is also generally quicker and less costly than litigation. Mediation is voluntary and although shareholders may want to proceed directly to court, attempting mediation first can save everyone time, money and stress.
Call a shareholder meeting
If mediation fails, your next step may be to call a meeting of the shareholders to discuss the dispute directly. A formal meeting allows the shareholders another opportunity to get together in-person to discuss the disagreement.
Call the meeting with a written request that clearly states what business will be heard at the meeting and include any proposed resolutions. Make sure that any meeting notice is in accordance with your governing documents or statutory provisions.
Bring in an advisor
If you cannot resolve the shareholder dispute at the meeting, consider bringing in a third party. This can be an advisor to the board or another director.
The third party can play a similar role to a mediator. They can offer a fresh perspective and suggest new and creative solutions that lead to a resolution. It is best to use a third party who is not involved in the daily operations of the business as they are more likely to act in the best interests of the business.
Formal negotiations
When none of these attempts at resolution produce a solution, formal negotiation could be the answer. This is generally a last chance effort to resolve a dispute before heading into court.
A formal negotiation usually works best when both sides have separate legal counsel to provide realistic advice on what they can hope to achieve through negotiation.
Successful negotiation should result in a written agreement. The agreement should be thorough and final so that everyone understands the resolution.
Courtroom litigation
If these attempts at resolution are unsuccessful, you can litigate a shareholder dispute in court. Whatever the dispute is about, whether it is a breach of fiduciary duty, shareholder oppression or other complex claims, sometimes the courtroom is the proper place for the dispute.
When you choose to litigate your shareholder dispute, it is important to have the right strategy and a knowledgeable advocate on your side.