Resolving Shareholder Disputes

Shareholder Disputes

Unfortunately, shareholder disputes are a common part of business, but they don’t have to be debilitating to your enterprise. If you have a shareholder agreement in place, you’re already in a more positive position to resolve issues, but whether you do or not, you still may face the decision on whether to institute formal proceedings to settle the disagreement.

Obviously resolving shareholder disputes out of court is preferable for many reasons, including saving precious time, money, and energy you could be using to grow your business. Many shareholder agreements provide for mandatory arbitration to settle disputes, but even making the decision to pursue that avenue can be fraught with questions.

For example, you should consider whether going to arbitration or even court proceedings will really give you the result that you want. Shareholder disputes almost always involve the inner, intimate workings of a company; outsiders such as arbitrators and judges rarely want to dip their hands too deeply into such situations and may be reluctant to provide the relief you seek from them, depending on the issue at hand.

Alternatively, another consideration is whether a judge’s or arbitrator’s decision could leave you with the most undesirable results, such as the involuntary dissolution of the company and liquidation of its assets. If that’s something you don’t want, and yet it could be a possibility in litigation or arbitration, you might want to try a little bit harder to reach an agreement informally.

If you can’t come to some sort of agreement on your own, you may consider mediation as an option — especially if it is crucial that the shareholders in the dispute continue to be on the same team and working together. A mediator, often an experienced attorney, works to facilitate communication between parties and reach a compromise that both parties, ideally, find reasonable and equitable.

Widerman Malek Attorneys

If you have found yourself in the middle of a shareholder dispute, it’s imperative that your interests are well represented as you seek a resolution. If you have any questions about the information in this article or want to discuss your situation, please contact me.

Other articles in this shareholder series:

• What Is a Shareholder Agreement and Do I Need One?
• Most Common Causes of Shareholder Disputes
• How to Avoid Shareholder Disputes