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What are common shareholder disputes?

On Behalf of | Feb 22, 2023 | Business Litigation

In the world of business, disputes will always happen no matter what sort of precautions a person takes. Obviously, it is best to err on the side of doing what is possible to avoid them, but know that they will likely happen regardless in some situations.

Disputes can disrupt an entire business flow if a person is not careful, so it is important to understand what causes disputes among shareholders.

Differences in compensation

The U.S. Securities and Exchange Commission takes a look at shareholder disputes. Among the many different disputes that occur, some reasons come up over and over again.

For example, a difference in compensation is one of the biggest reasons for issue. The agreement of each shareholder needs to reflect their individual responsibilities and compensations. On top of that, these all need to remain equitable and must undergo correction if that is not the case.

Violation of contracts

Contract violations are another big reason. If a shareholder breaches terms of the agreement such as through the wrongful sales of shares, all parties need to act accordingly and treat the matter like a serious issue from the start. Guidelines should exist within the contract showing what to do.

Divergent opinions

Management direction makes up the final biggest category for issues. Stakeholders always have the right to voice any concerns they hold about the direction of a company or the management. Conflicts between business owners or managers and shareholders are not at all uncommon, especially when they have two different visions for the business.