Need Assistance with Shareholder Dispute?
Business relationships can sour and partners may fall out as a result of disputes. Consulting commercial lawyers can help you resolve shareholder disputes in a collaborative manner. You and your partners may have incorporated a business entity and may differ on your respective visions for the business. Disagreements may also occur due to various other reasons. You may find yourself in a stressful situation if the relationship has soured and the shareholders are unable to agree on a vision. Alternatively, solutions may be proposed but your partners and shareholders may not agree to them.
Such a situation is known as a deadlock and this often has an adverse impact on day-to-day trade. It’s important to resolve the dispute so that problems are ironed out at the earliest. A shareholder’s dispute may occur between partners in a trust, directors and shareholders, between directors or generally between individuals who control a business entity. The underlying motive for a shareholders’ dispute is always a struggle for control. A trustworthy lawyer can help ascertain your legal position.
The shareholders agreement is an independent contract that contains comprehensive information about the following points:
- Rights and responsibilities of shareholders
- Professional and business arrangement among shareholders
- Shareholding structure
- Balance of power between major and minor stakeholders
- Protection of interests
In addition to these points, there are several other points covered in the shareholders agreement and constitution. Deadlocks and shareholders’ disputes can be resolved by various means such as mediation, buy-out orders (orders will usually be enclosed in sealed envelopes) or wind-up. The method of resolution will follow guidelines explained in the agreement. The first step in a dispute resolution process involves referring to the governing documents of the company. Reliable lawyers can help the disputing parties come to an agreement within the framework of the business constitution.
At times, the solution to the issues under contention may not be explained in the governing documents. In such cases, the shareholders may wish to consult the Corporations Act. If the shareholders choose to follow the Corporations Act, then the court is authorised to offer alternative solutions under Australian law. These include a buy-out (one shareholder may buy the other shareholder’s shares at determined prices), the company may buy the shares from the shareholder or the court may also appoint a manager and a receiver if the company is wound up.
The type of solution would depend on the nature of the dispute, the assets involved and so on. The important thing to keep in mind is that the business is at stake and therefore, it’s crucial to resolve disputes in a proactive manner. This helps minimise unnecessary acrimony, reduce stress and loss of revenue from day-to-day business.