While most shareholders want to see their companies succeed, differences in opinion on achieving that may arise. If left alone, such disputes may spiral out of control and become destructive in the end.
Disagreements can result in a significant expense if they end up in litigation, significantly disrupt business operations and damage your company’s reputation if they repeatedly occur. Fortunately, disagreements are commonplace in the corporate world, but they can be prevented or resolved amicably.
Common causes of shareholder disputes
Several reasons can cause shareholder disputes. Some of the most common ones include:
- A belief by the minority shareholders that the majority shareholders are not considering their interests
- Complaints by shareholders that they are not being kept up to date regarding the company’s finances
- A breach of the articles of association or other shareholder agreements
- A belief that any director or executive is not fulfilling their fiduciary duty
- Allegations of conflict of interest
There is hope for avoiding disputes like these. A solid shareholder agreement is probably the best place to start when it comes to preventing shareholder disputes. In addition, keeping thorough records will clarify any issues that may arise. Finally, proper planning around resolving shareholder disputes will provide clear direction on how to proceed.
If a dispute arises, mediation is usually the best way to go about it. Discussing the issues diplomatically can help you find a solution that’s workable for both sides. It is worthwhile to kick off the mediation process early enough before the situation boils over and tensions flare up. It may help you avoid the expensive and time-consuming litigation process and help you keep your company’s reputation intact.