Most Common Causes of Shareholder Disputes

No relationship is perfect — and that includes business relationships. Disagreements are inevitable even in situations that seem the most amicable, such as family-held companies. Disputes may involve absolutely anything concerning the business, from everyday operating procedures to how the company is being managed.

Some of the most common shareholder disputes including the following:

• Direction of the business. Whenever you have more than one person involved in a business, there is bound to be some difference of opinion on how things are running and where they are going. Some shareholders may even wish to close up shop when others want to plow ahead.
• Breach of shareholder agreement. A shareholder agreement can establish many aspects of the business such as voting rights and how a member may sell their shares. If a shareholder violates one of the provisions of the agreement, including any duties they are required to perform, they are in breach, and a dispute may arise.
• Breach of fiduciary duty. All shareholders have a duty to deal with one another in an honest and loyal manner. A conflict of interest with another shareholder or a rival company could cause a rift within the business.
• Rights of minority shareholders. By their very nature, minority shareholders are often underrepresented in many business decisions, which can make certain minority shareholders quite unhappy. Depending upon the source of their discontent, they may even bring lawsuits to pursue dividends or challenge certain decisions taken by the majority.

Hopefully you have a shareholder agreement firmly in place to help you deal with issues as they arise, but if you don’t, we can help.

If you’re just starting a business, now is the perfect time to nail down a shareholder agreement specially tailored to your business to avoid litigation concerning disputes.

Contact attorney John Frazier at (321) 255-2332 or jfrazier@uslegalteam.com to start the conversation.