Protecting Both Business Finances And Futures

Shareholder disputes can create challenges for your business

On Behalf of | Jul 16, 2020 | Business Litigation |

As a shareholder in your business, you likely know that disputes can rock its foundation. If you find yourself in dispute with another shareholder, fulfilling your duties could become difficult. At worst, it could jeopardize your enterprise. Yet, by understanding how to resolve it, you can keep your business on track for success and growth.

How shareholder disputes arise

Business relationships change over time, and a shareholder you once found simpatico may now prove impossible to work with. You may have agreed on your business’ goals and direction before. Yet, now their views have diverged from yours and you cannot move your business forward since your goals are at odds. Your dispute might also have arisen from power struggles. If the shareholder in question owns a minority stake in your business, they might push for a greater role – or greater compensation for their role. Any adverse actions, too, on their part could lead to tension. They may be withholding financial information for their personal gain. Or, they may have conflicts of interest that impact how they discharge their duties. In either case, your shareholder’s actions qualify as a breach of fiduciary duty.

How shareholder disputes resolve

When forming your business, you likely created agreements establishing your shareholders’ rights. You may have created plans for shareholder disputes and buyout procedures as well. Referencing these documents will be helpful in considering how to deal with your dispute. Some disputes can resolve through mediation or arbitration. But you will only want to pursue these options if both you and your fellow shareholder have your business’ best interests in mind. If they do not, you will want to litigate your dispute. Doing so may prove costly. But having an impartial judge rule on your case could save your business if your shareholder’s actions have the potential to harm it.

Failing to resolve a shareholder dispute could lead to long-term consequences for your business. By acting fast, you can protect both its reputation and viability.



FindLaw Network