How to Prevent Shareholder Disputes

How to Prevent Shareholder Disputes

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Several proactive measures can help prevent shareholder disputes:

• Clear Agreements: Establish a well-defined vision for the company from the start, ensuring all shareholders agree on goals and strategies, and include these in a shareholders’ agreement.

• Regular Communication: Hold regular meetings to keep shareholders informed and aligned on the company’s direction.

• Conflict Resolution Mechanisms: Include a conflict resolution mechanism in the shareholders’ agreement, such as mediation or arbitration, to resolve disputes quickly.

• Transfer of Shares: Establish a set of clauses to outline how shares can be bought or sold, what triggers a buyout, and how to value shares in the event of a sale.

• Death or Disability: an agreement will need to cover the situation for the death of a
  shareholder and what happens to their shares.

• Clear Expectations: Establish clear expectations for each shareholder’s roles and contributions from the outset, documenting these in the shareholders’ agreement.

• Roles within the Business: clearly define who is doing what in a Company. Ensure
  that each Shareholder has an employment contract which specifies who does what and
  more importantly, what happens to their role and their shares if they fail to deliver.

• Equitable Compensation: Ensure compensation and profit-sharing arrangements are fair and transparent.

• Dispute Resolution Clauses

• Decision-Making Authority: Clearly define the decision-making authority of shareholders in the shareholders’ agreement, including voting rights and board seats.

Common causes of shareholder disputes include:

• Disagreements over company direction
• Lack of buy-sell agreements
• Unequal contributions
• Differences in values or ethics
• Power struggles
• Breach of fiduciary duty
• Financial disputes
• Minority shareholder oppression
• Breach of contract
• Valuation and buyout conflicts.

If you need advice on a Shareholders Dispute contact our experienced team today at Sherwin O’ Riordan LLP

Speak with a Solicitor Today – Call 01 663 2000

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