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How can you avoid shareholder disputes?

On Behalf of | Feb 3, 2016 | Employment Litigation

Whether it is a small one-person operation or a large public corporation, the people who own a business are known as the shareholders. The Houston Chronicle points out that shareholders are both directly and indirectly involved in their company’s operations. Consequently, shareholder disputes may disrupt not only how a business functions, but also its bottom line. However, there are things that you may do to help avoid shareholder disputes.

Perhaps the most important thing that you can do is to ensure you have a shareholder agreement in place. This type of legal document will specify how your business will be run, including how day to day matters will be handled and how important decisions will be made. Additionally, shareholder agreements may include details stipulating how disputes will be dealt with.

Sometimes, differences of opinions between you and other shareholders may affect your business’ daily operations. This may be the case even if you have an agreement in place. In order to help avoid disputes that result from personality clashes, you may consider hiring an external director. An outside party may take an active role in dealing with the day to day issues of your business. Additionally, he or she may help mediate disagreements between the shareholders.

In situations when a mutual agreement cannot be reached between shareholders, you may consider a company buy back. Through a buyback, you, another shareholder or a combination of shareholders may buy the shares of the person with whom there is a dispute. In other cases, you may choose to sell your shares and walk away. This allows whoever chooses to sell to get their equity out of the business, while also allowing the other shareholders and business to get back to regular operations.

This post has provided some tips on how you may avoid shareholder agreements. It is important to keep in mind, however, that each case is unique. Thus, what works in one situation may not work in another. Therefore, you should consider this post only as general information and not take it is legal advice.


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