Shareholder Disputes

There are many decisions, both big and small, that shareholders need to make so that their businesses can run smoothly and effectively. Disagreements can be very disruptive to a business, with potential impact on a company’s commercial success and key relationships within the organisation.

Sherwin O’ Riordan LLP have a strong track record of effectively resolving even the most complex and contentious shareholder disputes.

With vast experience across our team, we can provide an assessment of your legal position and the various options, whether through an out-of-court settlement or via court proceedings if required.

We can also advise you on the steps you can take to avoid the risk of further disputes in the future, including reviewing your articles of association and shareholders’ agreement to ensure any potential points of conflict can be dealt with proactively.

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What is a Shareholders Dispute

Shareholder disputes are disagreements that arise among shareholders or between shareholders and company management, often concerning financial or operational decisions. These disputes can significantly disrupt a company’s operations and jeopardize its future. They can occur in various business structures, including corporations, partnerships, and limited liability companies.

Common Causes of Shareholder Disputes

• Breach of Shareholder Agreement: A shareholder agreement is a contract outlining shareholder rights and how the company is managed. Breaches of this agreement by the company or other shareholders can lead to disputes

• Poor Management Decisions: Mistakes by company officers and directors, such as backing the wrong business ventures or failing to make informed decisions, can violate the fiduciary duty of care and lead to disputes.

• Self-Dealing: Officers and directors have a fiduciary duty of loyalty to act in the best interests of the company. Self-dealing, such as competing with the corporation or making undisclosed profits, can trigger disputes.

• Shareholder Oppression: In closely held corporations, majority shareholders may owe a duty of loyalty to minority shareholders. Actions like freezing out minority shareholders or denying them access to information can lead to disputes.

• Financial Mismanagement: Disputes can arise over undisclosed financial information, improper accounting practices, or unfair dividend distributions.

• Valuation and Buyout Conflicts: Disagreements about a company’s value during buyouts, mergers, or acquisitions can lead to legal battles.

• Diverging Opinions on Management Strategies: Disagreements on the company’s management, restructuring, sale, or closure can lead to conflicts among shareholders.

• Capital Increases and Financing: Decisions regarding capital increases can also lead to disputes, particularly if some shareholders feel disadvantaged

Solutions and Prevention

Several strategies can help resolve and prevent shareholder disputes:

• Negotiation and Mediation: Direct negotiations or mediation facilitated by experienced Shareholders Dispute Solicitor at Sherwin O’ Riordan can help find mutually beneficial solutions without prolonged litigation

• Shareholder Agreements: A well-drafted shareholder agreement can significantly reduce the risk of disputes by clearly defining roles, responsibilities, profit-sharing, and dispute resolution procedures.

• Buyouts and Separation Agreements: Structured buyouts or negotiated separations can resolve disputes effectively when ongoing collaboration becomes untenable.

• Early Intervention: Early legal intervention is critical when shareholder disputes arise. The sooner you engage experienced counsel, the more options you have to resolve disputes favourably.

• Comprehensive Shareholder Agreements: Creating a strong shareholder agreement or articles of association that aim to cover all potential scenarios is the most effective way to avoid disputes. This includes defining shareholder authorities, share transfers, non-compete provisions, deadlock provisions, and dispute resolution methods.

• Maintain Comprehensive Records: Keeping and archiving detailed records of critical contracts, bylaws, shareholder meeting minutes, and other essential documents provides vital information to prevent disputes and expedite their resolution.

• Enhance Risk Management: Identifying risks within the company and in the market where it operates helps prevent potential disputes before they arise.

Types of shareholder disputes we can handle for you

Our shareholder disputes solicitors can assist you with resolving conflicts over a wide range of issues, including:

• The future direction of the business
• Payment of dividends
• Share sales
• Transfer of shares
• Acquiring or disposing of company assets
• Company acquisitions, mergers and disposals

For efficient, commercially practical legal advice to resolve a shareholder dispute, contact us today.

Related Blogs;

How to Resolve a Shareholders Dispute

Role of Shareholders Agreements in Shareholder Disputes

10 Common Causes of Shareholder Disputes

How can mediation be used to resolve shareholder conflicts