Shareholders have a significant investment in seeing their companies succeed. As a result, some shareholders become very passionate about the direction a company is taking. When you’re working with many shareholders, it’s rare for all the shareholders to be on the same page. Some business litigation professionals will tell you that shareholder disputes are unavoidable. While that might be true, it is possible to make these disputes few and far between.
How can disputes be avoided?
One of the best ways to avoid disputes and litigation is by preparing for them in advance. If possible, shareholder agreements should be sound and firmly established as early as possible.
Shareholder agreements should address disputes if possible. An ideal shareholder agreement will balance the interest of minority and majority shareholders as well as offer a way to break deadlocks if they happen.
In addition to the shareholder agreement, the company should have policies in place that will guide shareholders through any disputes and resolve them before they escalate. This can include undergoing mediation and pulling records from past shareholder meetings.
To keep all shareholders on the same page, it’s important to be as transparent as possible. A company should find a good way to get meeting minutes into the hands of all shareholders and make them accessible to people months down the line.
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Why is it so important to resolve disputes early?
A shareholder dispute that goes on past the point of mediation or arbitration often has to be settled in court. Disputes among shareholders can become a distraction for clients as well as employees.
If a shareholder dispute goes on long enough, it can pause growth and make people wary of working with your company. If you’re worried about a potential dispute, talk to a business litigation lawyer about your situation.