Shareholder Disputes: Avoiding Expense and Deadlock in Management

Shareholder disputes can really hurt a company’s move forwards, and can in the worse cases cause it to fail completely, winding up notices being submitted when the shareholders are too busy fighting each other to allow the business to operate properly.

The key point here is that any Shareholder disputes will be very expensive and generate uncertainty for all concerned. As mentioned above the process can trigger insolvency of the company if Shareholders are too busy fighting with each other to concentrate upon the business and a court considers this to be just and equitable.

Shareholder Dispute: What It Is, How to Spot the Signs and How to Avoid It

The best and most successful companies have one thing in common: they are managed well. When a company is managed well, it will be able to weather the storms of business.

But what happens when the company is not managed well?

That is often when shareholder disputes happen.

Shareholder disputes happen when the shareholders who own a company disagree with one another on important decisions that need to be made. This could range from which CEO to hire all the way to how much money should be invested into new projects. When we see signs of a shareholder dispute happening, it’s not too late for us to react and solve before it becomes an issue.

Here are some signs of shareholder disputes and how you can avoid them in your company.

  • Firstly, the company starts to lag in performance. When shareholders disagree on decisions and start making their disagreements public, it’s not uncommon for the company’s performance to suffer.

  • Secondly, when shareholders are unhappy with management and the company has been underperforming for a while, the company can be vulnerable to takeovers from other companies. 

  • Thirdly, when there are disagreements on important financial decisions like how much money should be invested into new projects or what to do with cash reserves, it might mean that there is a shareholder dispute happening

How to Avoid Shareholder Disputes

The best way to avoid shareholder disputes is, of course, prevent them from happening in the first place.

If you’re a company owner, it’s your responsibility to make sure that everyone is on the same page. It’s also important that you don’t force decisions on people who disagree with the decision. In a disagreement, it’s key that you hear both sides and allow each side to air their thoughts before making a decision.

If you’re a shareholder, it’s your responsibility to give constructive feedback to help the company overcome any struggles.

You can do this by offering different solutions or suggesting changes in leadership that you feel would be beneficial for the company in order for it to grow.

Hopefully you can see it’s important to be aware of the signs of a shareholder dispute and try  to avoid them becoming a real issue. But what can you do when things go wrong?

The first thing to do is to get expert advice from a company that specialises in resolving shareholder disputes at the very first sign that things are getting out of hand. Some of their remedies are covered below.

Alternative Remedy. Transfer of Shares?

There are many ways of coming to an agreement. If the constitution of the company allows, one of the Shareholders could transfer Shares to the others. This will not always work though.

Alternative Dispute Resolution

Another way to avoid such internal disputes is to use an external dispute resolution service or solicitors. This is often the best way forward as these types of Shareholder dispute can generate considerable heat (which if taken to the courts will cause massive legal costs) whilst not actually shedding much light on the ‘real’ reasons behind these disagreements.

Experience shows that various techniques of Alternative Dispute Resolution, specifically including third party Mediation but also Early Neutral Evaluation in front of a Judge, can save significant amounts of time and money.

Talk to an expert in commercial litigation before things go too far

If you or somene you know is involved in a shareholder dispute of some kind, the best thing to do is to contact someone who offers dispute resolution services, like NDandP. Make sure you choose a specialist though, as this area is where ‘political’ skills are really required.

The initial discussion of your case will reveal the ways that it can be dealt with, and as mentioned above, catching things early on will, as experience shows, give all parties a better chance of reaching a mutually agreeable position, without the need to take the matters to court.

sudarsan

Sudarsan Chakraborty is a professional writer. He contributes to many high-quality blogs. He loves to write on various topics.