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How to handle shareholder disputes

by | May 9, 2023 | Business Transactions

As a company with shareholders, you know you have a host of people with different personalities, ideas and values to contend with.

Shareholders invested in your business, which means they expect to see the value of their shares grow. While you hope everyone stays on the same page regarding business matters, disputes easily arise. When that happens it may put the company in jeopardy.

Why disputes happen

An array of situations has the potential to stir the pot. A shareholder could have a dispute with another shareholder, the business owner or the management team. Leading causes include:

  • Disagreement regarding business operations
  • Dividend payments
  • Compensation inequities
  • Deadlocked shareholders
  • Improper article amendments
  • Breach of fiduciary agreement

While not an exhaustive list, even conflicts of interest among shareholders or owners may bring about a dispute.

Ways to solve them

The key to any disagreement remains getting to the root of the problem. Listening to shareholders’ concerns and determining the motivation behind the dispute helps determine the path of resolution. Regardless of the issue, having a discussion may lead to hashing out the details.

Although some disputes easily resolve themselves due to miscommunication or a simple error, others have the potential to harm the business. If temperatures start to flair, consider hiring a neutral mediator to help both sides come to an equitable solution. More serious disputes, such as ones that involved fraudulent activities, may require more drastic measures, such as filing a lawsuit or taking a buyout.

Business law has a complexity that only grows during a dispute. If any dispute arises, seeking legal assistance and obtaining USPAP-certified independent valuation put you a step ahead.