What options do you have if a shareholder dispute arises?

Many business owners go public and put shares in their company up for sale to increase the funds necessary to grow their reach. Doing this doesn’t come without downsides, however.

Shareholders get something out of investing funds in a growing business. As the company’s owner, you have to answer to your shareholders once you introduce them into the mix.

The emergence of disputes between shareholders and company owners isn’t uncommon. They often happen because shareholders aren’t content with your company’s operation. Having a shareholder agreement that addresses a few different details is key to keeping conflict to a minimum.

Forced sales of minority stakeholder’s shares

One option for minimizing stakeholder and company owner disputes is checking and seeing if the shareholder agreement contains a clause requiring minority stakeholders to sell off their shares. Many shareholder agreements contain these to limit the minority from restricting the majority from acting in desirable circumstances (such as offering them an ideal buyout offer).

How to handle a shareholder’s desire to leave

Your shareholder agreement should also address what should happen if one of your stakeholders wishes to go their own way. Your agreement needs to define how you will assign a valuation to their shares and who will have priority status to buy them.

Strategies for addressing disputes that arise

Litigation can be both time-consuming and costly. Mediation may be less time and cost-intensive than this. You’ll need to include terms and conditions requiring the use of mediation to resolve your differences with shareholders. This option gives you the best chance of reaching an agreement that you both can feel comfortable with.

Resolving disputes when your shareholder agreement is lacking

Not all shareholder agreements are the same. You’ll need to review your contract to see what rights it affords you and your stakeholders when disputes arise. Understanding legal agreements can be challenging, so learn everything you can about your options.