How to Resolve Shareholder Disputes Over Your Business

How to Resolve Shareholder Disputes Over Your Business

by Brooke

It is not uncommon for companies to solicit funds from outside investors. However, there is no guarantee that the founder of a company and its shareholder will agree on every decision the business makes. Therefore, it is important to have a plan in place for resolving disputes between your company and its investors.

Hold Private Talks to Resolve the Matter

In some cases, it may be possible to overcome a misunderstanding by talking about the issue at lunch or over a round of golf. This may be ideal in situations involving shareholders who are easy to communicate with and tend to be flexible when it comes to solving problems. If multiple shareholders are involved in a dispute, a conference call may be an appropriate venue for addressing everyone’s concerns.

Have Your Attorney Talk with the Shareholders

There may be situations in which working directly with shareholders may be seen as an owner exerting undue influence on shareholders. Alternatively, those who are having a dispute with may not want to speak with you until their demands are met. Therefore, it may be a good idea to have an attorney, such as Ashley West, negotiate a resolution with your shareholders. If necessary, your attorney can represent your interests in court if private talks or other dispute resolution methods fail.

Review the Corporate Charter Carefully

Your corporate charter should spell out the rights of individual shareholders. Ideally, this document will specify what types of voting rights they have and what other recourse that they may have if a dispute arises. You and your attorney may be able to use this document as the foundation for any settlement that may be reached in the matter.

Create a Buy/Sell Agreement

A buy/sell agreement stipulates the value of a person’s stake in the company. It also specifies who an ownership stake in the company can be sold or transferred to. In many cases, the buy/sell agreement allows other owners to absorb the shares that are sold or abandoned by a fellow shareholder. In some cases, allowing a disgruntled shareholder to sell his or her stake in the business is the easiest and most affordable way to resolve a dispute.

As a business owner, it is important that you plan for as many different problems that your company could encounter as possible. Ideally, all agreements with shareholders and other important parties will be put in writing and vetted by an attorney. This may prevent a dispute from derailing a company before it can reach its potential.

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