Is a Shareholders’ Dispute Threatening to Disrupt Business?

Obtain Insights into your Rights and Obligations

It’s common for friends to decide to go into business together. However, as experienced commercial lawyers will tell you, it’s equally common for friends to fall out when they become business partners. Businesses are often started by friends who take a shared idea or vision forward and turn into a profitable venture. The initial excitement of starting up a new business often results in the partners turning a blind eye to the problems that may occur in the future. This is especially true when young and inexperienced entrepreneurs embark on a new business.

There is always a possibility that things may turn sour or the partners may have divergent visions for the business. In other words, it’s important to have a set of watertight business documents and an agreement that provides guidelines on various aspects of business. In fact, it’s fairly common to come across businesses that lack governing documents in cases of disputes. Most shareholders tend to consult a legal professional after the problems start rearing their heads. It’s a good idea to have a business agreement or governing documents in place because you will have a well-structured reference that contains solutions to contentious issues that may arise.

Competent Commercial Litigation Lawyers can help you Resolve Business Crises

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.

Current Situation Around Shareholder Disputes Under Australian law

Company law of Australia regulates shareholder disputes and various methods of dispute resolution. In case a business entity is owned by two or more shareholders, is managed by two directors and there is no shareholders agreement, the business entity will not be immune from a variety of disputes that may occur there and create deadlock between the members. There are several dispute resolution strategies that help Australian companies survive. Present-day shareholder agreements tend to handle situations when it is necessary to share sales proceed. Also, modern shareholder agreements may regulate how “bad leavers” – shareholders and employees who have resigned or been terminated with cause – be compelled to sell their shares back to the company. However, if there is no shareholder agreement, there may be much more difficult to settle shareholder disputes under Australian law. In this connection, the disputing parties frequently have recourse to the company constitution, according to which deadlocks can be resolved by way of a casting vote of the chairman. In case a shareholder shows intent to get rid of this shares, he has to propose them to other shareholders, in accordance with the company constitution, or, if the company does not have any constitution, in conformity with the replaceable rules in the Corporations Act that empower the company in cases when, for some reason, the company does not have constitution.