Edgar Law Firm LLC Trial Lawyers

Adeptly Guarding Your Business’s Interests

Common causes of shareholder disputes

On Behalf of | Jul 30, 2022 | Business Litigation

Disputes are a near-inevitability in the business world. If you run your own corporation, the most sensitive disputes you should anticipate are those that involve shareholders.

The slightest thing can set stakeholders against one another, or at times the dispute might be between shareholders and the business itself. Disagreements can have a domino effect that may disrupt your entire business, so it is necessary to know and prepare for various causes of shareholder disputes.

Contract violations

When a shareholder commits wrongful selling of shares or otherwise breaches the terms of their agreement, all parties must take it very seriously. The contract itself should provide guidelines on how to proceed if a shareholder is in violation.

Differences in compensation

Each shareholder’s agreement should outline the compensation and responsibilities of the individual. These items must be equitable among all shareholders, and it bears correcting if they are not so.

Management direction

Stakeholders in a company have the right to voice their intentions and concerns regarding the management and direction of the business. When there is a significant difference between the opinions of a shareholder and business owner, a large-scale dispute may arise. Each corporation likely has its own process in place for resolving arguments over company direction, but hostile actions may follow when one side does not get its way.

Shareholder disagreements can cause ripples through a company, even when the contracts in place provide solutions to the problem. Even so, the best way to handle a dispute is to follow the outlined process or settle things through litigation when necessary.