Legal Blogs

What is Corporate Litigation?

What is Corporate Litigation?

To understand what corporate litigation is, we must have a clear idea of corporate law. It is the body of statutes, regulations, rules, case authorities, and practices governing the rights, relations and conduct of entities, businesses, organizations, and persons. It regulates how corporations and other business entities interact with their owners, management, employees and third parties.

Corporate litigation involves the resolution of disputes between a company and entities or persons directly involved in it. Corporate litigation matters may occur throughout the  lifecycle of the entity, from its formation and funding and its governance and dissolution.

Examples of corporate litigation

  • A dispute between the company and its shareholders
  • A dispute over the power and decision-making within the company
  • A dispute related to the procedures for mergers, acquisitions,, conversions, or dissolutions
  • A dispute related to the appointment and removal of directors and officers
  • A breach of contract with another business

By its nature, a corporation is a separate legal entity independent from the shareholders that own it. Generally, the shareholders in  a corporate litigation cannot lose more than their investment in the corporation. This is one of the major characteristics of corporate law, which we’ve discussed briefly below.

Characteristics of corporate law

Corporate law follows certain common principles:

A distinct legal personality

As already explained, a corporation is a distinct legal entity separate and apart from its shareholder owners, acts and obligations of the corporation are of the corporation alone, and not acts and obligations of its individual shareholders.

Limited liability

A corporation protects its owners from personal liability. Under corporate law, shareholders  are not generally personally responsible for claims against the corporation.

Transferable shares

Should a shareholder no longer want to retain their ownership  in the corporation, the corporation can continue. The individual can transfer shares in accordance with a written agreement on shares transferability, or in accordance with law..

Delegated management

A corporation’s structure consists of three main groups: shareholders, directors, and officers. Shareholders elect a board of directors to maintain strategic oversight over operations. The board of directors appoints officers to run daily operations. Directors, officers, and controlling shareholders are fiduciaries of the corporation, owing a duty of loyalty and care to the corporation and its shareholders. Officers and directors may be sued for the actions they take during the course of their employment in breach of these duties.

The goal of corporate litigation is avoidance of litigation 

The answer to ‘what is corporate litigation?’ isn’t that it is suing or defending against a related entity. It has to do more with avoiding litigation by ensuring compliance with federal and state law. In the event that the company is subject to a claim of non-compliance with these laws, , litigation lawyers will defend the corporation.

Litigation can largely be avoided by having a lawyer specializing in corporate law for advice on preparing legal documents, understanding risks and their management, and providing insights during the negotiation of deals. As mentioned previously, corporate litigation encompasses the entire business lifecycle. Engaging a corporate litigation firm early on will make it easier to fulfill legal obligations related to the formation, governance, and dissolution of the business. Specifically, the firm can provide legal guidance in the following matters:

  • Choosing the right legal structure for your business
  • Negotiating and signing leases, contracts, and other agreements
  • Establishing a fair hiring and termination system that complies with the laws of the jurisdiction
  • Ensuring compliance with new accounting and corporate governance regulations
  • Administering a merger and/or acquisition
  • Obtaining investor financing

If a claim is brought against the company, a law firm will step in to:

  • Defend against  lawsuits
  • Resolve labor disputes
  • Resolve breach of contract issues with other businesses
  • Resolve tort issues from claims of injury or harm by a client or customer
  • Resolve commercial real estate issues covering premises liability or disputes with landlords or regulators

Examples

A corporation owning a multi-use commercial building wants to evict a tenant. A corporate litigation attorney can be of service. The lawyer may also help in drafting or modifying lease agreements, and advise on and ensure compliance with eviction laws, and initiate litigation if necessary.

Corporate litigation also serves as a tool to enforce employment agreements. For example, a company may use the services of a law firm to create confidentiality agreements to protect the employees’ disclosure and use of proprietary or other confidential information of the company. Employees found in breach of this agreement can be sued for damages in court.

Tips to avoid litigation

Litigation is expensive, time-consuming, and stressful. Fortunately, it can be more easily prevented with foresight and good legal advice from a Irvine corporate litigation attorney. We recommend taking the following steps to reduce litigation risk.

Create clear agreements

Disputes can sometimes arise from difficulties in interpreting the agreement or inconsistencies in terms. A good business agreement sets out parties’ legal obligations clearly, increasing the likelihood of complete performance with terms and making disputes from a poor comprehension less likely. Having a business law firm create comprehensive and understandable agreements is one of best actions you can take to avoid getting embroiled in a dispute in the future.

Read the terms of your contract!

Yes, the effort spent in creating agreements will go to waste if you fail to meet your obligations and duties under them. It can very well occur from not reading the requirements or conditions you were supposed to know during the course of implementing a procedure or delivering a service. As a best practice, prepare a contract summary and a checklist of procedures soon after the contract has been signed by all parties.

Use the protective cloak of privilege

A privilege is a legal rule that protects communications occurring within certain relationships against being disclosed in a court proceeding. The attorney-client privilege is one such privilege. It gives you the right to provide privileged documents, such as personal notes or internal reports, to the other party if you want. You can invoke privilege in consultation with your lawyer and exercise more control over what you disclose.

Give compromise a chance

An amicable settlement requires some measure of compromise. It may be the best thing you do, considering the uncertainty of courts and high costs of litigation not to mention the productivity and opportunity loss from the distraction. If the issue has reached a level where litigation is but inevitable, utilize lawyers with extensive litigation results to achieve results.

What can you expect from a corporate litigation attorney?

Your attorney will determine the most suitable legal strategy for your situation. While trying a case is always on the table, experienced litigators understand that they must strive to get the best possible results at a reasonable cost.

An experienced corporate litigation attorney will classify a case based on the motive for it. It could be that a competitor is trying to put you out of business. Or it could be an issue that commonly arises due to a breach of contract. The best attorneys will use sound judgment to correctly interpret a dispute, identify the ideal course of action, and execute it efficiently.

Stay out of court with Brown & Charbonneau, LLP

We’ve represented plaintiffs and defendants in a wide variety of business disputes. Our legal advice and counsel has helped Irvine businesses move on from disputes unscathed and satisfied. Call us at 714-505-3000 or tell us about the issue you’re facing through our online form.