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How to handle shareholder disputes

Your company’s shareholders are crucial as they essentially own the business. Thus, it helps to be on the same page with them. However, disputes between you and shareholders or among themselves can arise. Several factors can contribute to this, including breach of the shareholder agreement, minority shareholders believing they are not respected, disagreements on the company’s direction/management and fiduciary misdeeds.

Shareholder disagreements can take attention away from business operations and potentially escalate to expensive lawsuits. Therefore, it’s crucial to solve them quickly.

Here are two tips on how you can handle these disputes:

1. Review the shareholder agreement

Chances are your shareholder agreement has clauses that can help you solve a dispute. For example, if shareholders argue about rights, you can review the contract to obtain the needed information. The conflict resolution methods in your shareholder agreement can also help you in such circumstances, making your work more manageable.

2. Try mediation to find a consensus

If the conflict resolution methods in your contract or negotiation do not offer the expected results, you should consider mediation. A mediator can help the involved parties discuss the issue in question and try to find a resolution that doesn’t involve litigation.

Can you prevent shareholder disputes beforehand?

You can prevent shareholder disputes before they happen as long as you understand their causes. For instance, keeping in-depth records from meetings and agreements can prevent disagreements, as you can determine which party is right in a conflict. Additionally, ensuring minority shareholders have power in certain decisions and are well-informed about matters can prevent disputes between them and majority shareholders.

Shareholder disputes can lead to stressful situations. When problems erupt, legal guidance can help to protect your business.