Shareholder disputes are never pretty. Such disputes evidence a material breakdown in the assumptions and expectations which lead, in the first instance, to going into business with your partners. By the time a shareholder dispute reaches our front door, the almost universal outcome is not getting the parties working together again, but addressing an equitable resolution with as little rancor and expense as possible.
Quite often, the situation which leads to a shareholder dispute arises some months, or even years, earlier when another shareholder purports to usurp power which exceeds either the By-Laws, Operating Agreement or a Shareholder Agreement. Such situation, and the feelings generated by such conduct, often festers and grows to the point that the next act of egregious conduct brings the dispute out into the open. At that point, restoration of a working relationship is likely gone forever.
The need then arises to weigh the equities in light of existing agreements and the law and attempt to resolve the situation by a buy-out of either the offending or offended shareholder. Failing a buy-out, resort to the proper forum, either court or arbitration is next, where the facts can be discovered and told, and resolution by a judge or arbitrator can be handed down.
Each shareholder dispute is unique, as are the personalities of the shareholders. Understanding that these disputes can consume not only a substantial amount of time, thereby diverting your attention from your primary objective, running your business or getting this dispute behind you, they can also be quite expensive.
We first bring our corporate experience to bear on shareholder disputes, because understanding the law of corporations and limited liability companies, together with understanding the respective parties’ obligations arising under binding agreements, including Buy-Sell Agreements, is key to evaluating the merits of the dispute. If the dispute is not resolved by us, then the next resort is litigation — either before the courts or an arbitrator, if arbitration is an option. Working closely together, our goal is to present the facts and the law to both the other side and, if necessary, court or arbitrator to reach the desired outcome.
To read about what proper planning can do to minimize, if not eliminate full blown disputes from crippling your company, read our article Shareholder Rights and Issues.
We have represented both sides in shareholder disputes (though obviously, not in the same case). Knowing that there is usually more than money invested in these disputes, we bring our overall talents and experience in working to reach an expeditious and equitable resolution.