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Avoiding shareholder disputes

| Jun 24, 2021 | Business & Commercial Litigation |

Shareholders in Georgia and elsewhere often have the same goal in mind. They want the business to be successful. While having the same objective is helpful, not all shareholders agree on the efforts needed to get to that point. This is when shareholder disputes could arise, resulting in difficult matters and the inability to move forward with major business dealings. As such, it is important that shareholders understand what disputes could occur, how they could be avoided and what steps could be taken to resolve them.

Why disputes should be avoided

The primary reason to avoid shareholder disputes is to prevent the potential impact they could have on the company. For example, a dispute could be costly because it could cause lost time, lost revenue, costs for arbitration and even litigation expenses. Often times, these matters involve a focus on defeating the opposition rather than reaching a productive solution.

Another reason to avoid shareholder disputes is because they can cause a distraction from normal business operations. This could ultimately negatively impact future profits and growth. Finally, disputes have a tendency to escalate. Therefore, if they are not managed early on, they could evolve in a major dispute that could significantly impact the business.

Strategies to avoid disputes

One way to avoid shareholder disputes that could negatively impact a business is by creating a shareholder’s agreement. The terms in this agreement are critical and should include provisions that help balance minority and majority shareholders, provide mechanisms to break deadlocks, places limits on the transfer of shares, require that thorough records are maintained and outline mandatory mediation if a falling out between shareholders does occur.

Navigating a shareholder dispute could be a complex matter to navigate. While disputes are inevitable in a business, it is vital that steps are taken to reduce them and resolve them when they do come up. It is possible that a major dispute could occurring, warranting legal measures to resolve them. The future success of a business could be on the line, making it imperative that timely and effective action be taken.