Shareholder disputes can arise for a number of reasons but are often the product of poor communication between shareholders and directors. Whatever the reason, internal conflicts between shareholders can often bring the company’s normal business to a standstill if not resolved quickly and satisfactorily. Here are our top 5 tips on how to best resolve a shareholder dispute.
Prevention is better than the cure
The best way to resolve shareholder disputes is to avoid them in the first place. Make sure to seek legal advice at an early stage in order to be fully informed of your legal rights and duties as a shareholder or director.
Back to basics
If you do find yourself in a shareholder dispute, the first line of action should be to refer back to the company’s ‘core documents’, which usually consist of the Articles of Association, Shareholder Agreements (if any), and the Statutory Registers. These core documents are extremely helpful in resolving disputes because they often contain vital information about the company’s proper rules and goals.
Back to the boardroom
It may seem counterintuitive, but the best way to resolve a shareholder dispute is to try and talk it out and reach an amicable solution that is suitable to all parties. Not only does this save time and money, it also helps preserve good working relations and trust among members of the company.
Mediation
If a shareholder dispute cannot be resolved amicably amongst the shareholders, the next best option is to engage an impartial third-party to mediate a resolution. This is only possible if all parties to the dispute are willing to compromise in order to reach a solution that is in the greater interests of the company. Ideally, the mediator should have had no prior dealings with the company, and should be well-informed of the underlying legal and factual matrix.
Assess the merits
If a resolution cannot be reached by negotiation and discussion, the next option would seem, naturally, to bring legal proceedings to enforce your rights. However, before doing so, it would be prudent to seek advice as to the full merits of your case.
