A shareholder dispute is a disagreement between a company’s owners regarding its management or ownership. Typically, such disputes involve issues like company financing, the interpretation of a shareholder agreement, or the work obligations of shareholders. What all shareholder disputes have in common is their impact on the company’s ability to operate efficiently.
A shareholder dispute can be resolved with the assistance of an experienced lawyer. We have helped numerous shareholders settle disputes. We assist companies and their shareholders in:
- Resolving disputes related to shareholder agreements
- Negotiating terms for a shareholder’s exit
- Drafting a new shareholder agreement to prevent future conflicts
- Executing a redemption process to dissolve a shareholder’s ownership.
Common causes of shareholder disputes
Shareholder disputes often arise from factors such as:
- Interpretation of the Shareholder Agreement – Differences in understanding the terms of a shareholder agreement—such as valuation, profit distribution, decision-making, or responsibilities—often lead to conflicts between shareholders. Incomplete or ambiguous agreements require clarification of the parties’ original intentions and interpretation of the terms to resolve disputes.
- Shareholder’s Work Obligation – A company’s success often depends on the significant contributions of its entrepreneur-shareholders. If a shareholder’s role in the company changes or ends, the conditions for their continued ownership must be reassessed.
- Financing – As a company grows, shareholders may develop differing views on the need for new investments or financing strategies. Decisions on internal revenue funding versus external risk capital influence the company’s management. Shareholders may also have varying financial capacities to invest the necessary capital. When a company raises funds, ownership shares can shift, often triggering strong reactions and potential disputes.
- Shareholder Exit – A working shareholder’s decision to leave the company—or demands from other shareholders for their departure—fundamentally alters the business. A well-managed transition can move the company into a new phase, whereas a poorly handled one can breed resentment and escalate into a shareholder dispute.
- Company Valuation – Departing shareholders often disagree with remaining shareholders about the valuation of company shares. There are multiple methods for determining a fair buyout price. We assist shareholders in evaluating different valuation models and negotiating a justified redemption price for shares.
