Common Causes of Shareholder Disputes
This article will help to describe and explain the common causes of Shareholder Disputes. Shareholder disputes are a popular reason for a business to experience operational and financial problems. When co-owners become involved in a disagreement, this can cripple the ongoing performance of essential business tasks. It can undermine a company’s reputation and make it impossible to provide goods or services at the highest possible level. A brand can be permanently damaged, and a business could even shut its doors if the dispute is not able to be resolved.
The impact of shareholder disputes can have such grave consequences that is very important for companies to do everything possible to avoid disagreements. Working with an Orange County business litigation lawyer is one of the smartest things a company can do.
You should get legal help during the formation of a company to reduce the chance of a business dispute occurring. If your business is already operational but you do not have protections in place to prevent disagreements, getting legal help is also advisable. Finally, seeking professional legal advice becomes key as soon as a dispute arises so an attorney can help you to find the best way forward with coming to a quick, amicable resolution that puts your company on firmer footing going forward.
Orange County Shareholder Disputes Attorneys Brown & Charbonneau, LLP can provide comprehensive assistance both with preventing shareholder disputes and with ensuring that you have taken the right steps to resolve your disputes in the most effective way possible. Give our expert California business litigation lawyers a call today to find out more about the ways in which we can assist you.
Common Causes of Shareholder Disputes
Shareholder disputes can arise for a wide variety of different reasons. Some of the most common causes of disputes among co-owners in a business include:
- A belief that any shareholder, director, or executive is not fulfilling his or her fiduciary duty. Owners, directors, and executives owe the highest duty under the law to the company and must put the interests of the business above their own personal interest.
- A belief by minority shareholders that majority shareholders are not taking their interests into account. Minority shareholders may feel they are being unfairly prejudiced by the actions of the majority.
- A complaint that shareholders are not being kept up-to-date on a company’s finances. The latest financial information should be provided to co-owners within a company.
- A breach of shareholder agreements or of the articles of association. When contractual obligations are not fulfilled, this can give rise to shareholder complaints.
- Conflict of interest allegations: When any shareholders act in their own personal interests or have competing interests, this can give rise to disagreements and problems.
When a company is closely held and the shareholders are involved in the day-to-day operations of the business, this can create additional potential for conflict. The co-owners who are working together may be unable to agree on operational decisions or may feel as if one of the other owners is encroaching upon his or her job authority. The more closely involved each shareholder is with operational decisions, the greater the potential for conflict.
Preventing and Resolving Shareholder Disputes
There are ways to minimize the chances of shareholder disputes arising. In order to do this, it is best to get legal advice from a qualified shareholder disputes lawyer. An attorney can provide insight into the types of contractual agreements and legal documents that reduce the potential for conflict.
Carefully drafted incorporation agreements, partnership agreements, articles of association, and shareholder agreements can go a long way towards avoiding problems. Employment agreements and buy/sell agreements are also beneficial so each of the shareholders understands their rights and responsibilities.
If a dispute does arise, despite the best efforts of all involved, the disagreement should be resolved through mediation whenever possible so all parties can contribute to finding an amicable resolution. Arbitration and litigation are also possible methods of resolving disagreements, but both of these solutions put the outcome in the hands of a third party (either a judge or an arbitrator).
Shareholders should all have the best interests of the company first and foremost in their minds and should be able to find ways to work together in order to come to the most effective resolutions.
Getting Legal Help from the expert Orange Counge Shareholder Disputes Lawyers
If you want to take the right steps to ensure shareholder disputes won’t affect your investment in your company, now is the time to take action. Contact Brown & Charbonneau, LLP today at 714-505-3000 or contact us online to find out how our legal team can assist you.