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Resolving shareholder disputes

On Behalf of | Jan 18, 2022 | Business Law, Commercial Law

Many businesses have investors, called shareholders, who provide funds in exchange for a share of the business. Sometimes, shareholders have disagreements about how the business should meet its objectives.

When the dispute is unresolved, it can take the focus off the day-to-day operation of the business and have an unintended consequence of affecting its profitability and growth.

Shareholder agreements

One of the primary ways to avoid disagreements is to have a well-drafted shareholder agreement. The agreement should be created at the same time the business opens, then can be referred to later if needed.

It should contain expectations for balancing minority and majority shareholder input. For example, it may include a requirement that certain decisions require minority shareholder participation. It may also be helpful to include a limit on transferring shares so that shareholders are aware of how many shares are held and by whom.

When a shareholder dispute arises, they can also refer to meeting minutes, decision logs and the bylaws to help resolve the disagreement. If the business can designate a person to keep detailed notes and records, it may help later to determine which party is correct.

Dispute resolution

In some situations, the parties are simply able to talk to each other and resolve the dispute. However, if the parties are not able to come to an agreement, they have an option to take the matter to court.

If a business owner needs assistance to create an agreement or to resolve a dispute, an experienced attorney can help.