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3 ways businesses overcome shareholder disputes

On Behalf of | Oct 19, 2022 | Business Litigation

The parties that invest in a business and become shareholders have an interest in its operations. The rights of shareholders include voting rights, a partial ownership interest and an influence on the long-term goals of the company. They help plan for the future and make choices about the executives who lead the business.

Unfortunately, shareholders may disagree about what would be best for the company. A dispute could delay crucial changes and could even affect the culture of the company. Sometimes, disputes arise that stagnate a company because shareholders can’t seem to agree on the next step to take.

Shareholder disputes may have to do with differing ideas about the company’s future or about the right leadership for the organization. They may also have to do with financial issues, such as substandard returns for shareholders. How can an organization effectively resolve shareholder disputes and move the company forward?

Organize a meeting

Sometimes, shareholder meetings will involve a healthy debate about issues that currently divide the shareholders. In these situations, when enough conversation occurs, shareholders may start to change their minds on certain issues.

A well-conducted meeting could effectively break up a corporate log jam and help a company resolve a shareholder dispute.

Make a buyout offer

Sometimes, a single shareholder or a small coalition of shareholders blocks the plans of others. Those hoping to bring in new executives or redirect the company’s focus may sometimes need to commit financially by buying out minority shareholders who stand in the way of those major changes. Given the cost involved, a buyout may not always be a practical solution for a shareholder dispute.

Dissolve the organization or arrange an exit

In extreme cases where a dispute leads to protracted disagreement and company dissolution may be necessary. Other times, executives and shareholders may need to consider selling their interests and cooperating to start a new organization that better aligns with their goals.

Shareholder disputes can be very complex and expensive to resolve. The more quickly your company evaluates possible solutions and moves to resolve the issue, the easier it will be to diminish the financial impact of the dispute on the company.

Exploring all of your options for resolving a shareholder dispute can help your company move forward and grow.