A shareholder dispute is a disagreement between shareholders of a company regarding the management or operations of the company. It can involve issues such as control of the board of directors, distribution of profits, management decisions, and interpretation of shareholder agreements. These disputes can arise due to differences in opinions, mismanagement, or other factors, and can impact the financial performance and stability of the company. At Stillman LLP, our priority is the best interests of our clients. We achieve this by providing our clients with solutions that match their unique circumstances and objectives. After being retained on any file, our lawyers, in direct consultation with you, will come up with a plan that fits your needs, budget, and expectations. Our firm’s 14 lawyers in Edmonton will find a cost-efficient and effective outcome with customized solutions. Get in contact with us today and get the solution you need.
In shareholder disputes, the following steps can help protect your interests:
Review company documents, such as bylaws and shareholder agreements
Reviewing company documents, such as bylaws and shareholder agreements, is an important step in protecting your interests in a shareholder dispute. Bylaws outline the rules and regulations for the company, including the rights and responsibilities of shareholders. Shareholder agreements typically outline the specific terms and conditions agreed on by the shareholders, such as voting rights, ownership percentage, and dispute resolution procedures.
By thoroughly reviewing these documents, you can gain a better understanding of your rights as a shareholder and the steps you can take to protect your interests in the event of a dispute. For example, the bylaws may outline the procedure for electing directors or the process for calling a shareholder meeting, which can be crucial in resolving the dispute. The shareholder agreement may also specify how disputes should be resolved, such as through arbitration or mediation.
Having a clear understanding of the company’s rules and agreements can help you make informed decisions and take appropriate action in the event of a shareholder dispute. It is also a good idea to keep these documents readily available in case you need to reference them in the future.
Seek legal advice to understand your rights and options
Seeking legal advice is an important step in protecting your interests during a shareholder dispute. A qualified attorney can provide guidance on your rights as a shareholder and the best course of action to take in a particular situation. They can help you understand the company’s bylaws, shareholder agreements, and other relevant laws and regulations that may apply.
By working with an attorney, you can better understand your options and the potential outcomes of different courses of action. For example, an attorney can advise you on the feasibility of bringing a legal action, such as a derivative lawsuit, against the company or its management. They can also help you negotiate a settlement or mediation agreement that protects your interests.
In addition, an attorney can provide valuable support throughout the dispute resolution process. They can represent you in negotiations, communicate on your behalf, and provide expert advice on complex legal and financial issues.
Attempt to resolve the dispute through negotiations or mediation
Knowing how to resolve conflicts can be difficult and going to court doesn’t need to be the first response. There are other options that the law requires us to at least check before going to court. Negotiation and mediation are among the options, and you can choose the one that best suits your needs.
Negotiation
means reaching an agreement with the other party and will be up to how you want to proceed. The law does not require you to follow any particular procedure or format. You can choose to have a professional negotiator accompany you and negotiate on your behalf. The title “negotiator” does not require legal proof and you will be able to choose who you would like to assist you in this negotiation. Even if you don’t reach a solution through negotiation, you can still try to negotiate later, even if your dispute goes to court.
Mediation
is a type of negotiation in which a third party facilitates the conversation. The mediator takes an active role in assisting you in identifying your needs and interests. If the mediation is successful, the mediator can propose solutions and even draft an agreement. The mediator must maintain objectivity at all times. They cannot prefer one party over another or provide an opinion on who’s “right” and who’s “wrong”. Instead, their role is to assist you in communicating with the other party in order to reach a satisfactory solution.
If necessary, consider taking legal action to enforce your rights
Shareholder disputes can arise when there is a violation of the terms of the shareholder agreement.
For example:
- Selling of shares in a manner contrary to the consent of the shareholders
- Breach of Restrictions
- Breach of fiduciary duty by a major shareholder
- Breach of confidentiality
- Transfer of company assets without due approval from major shareholders
For the breach of the agreement, the aggrieved party can ask the Court for the following remedies:
- Monetary and non-monetary damages
- Delivering on specific actions stated in the contract
- An order to do or avoid a particular act
- Buying and selling shares of a party that is defaulting
Keep accurate records and documentation related to the dispute
Maintaining accurate and up-to-date company records should be a high priority for business owners, directors, officers, managers, and consultants. However, a lack of discipline when maintaining company records can cause major headaches in many situations, including audits by the Canadian Internal Revenue Service, challenging proposed management actions, and buying and selling companies. Improper recordkeeping can delay important transactions, such as the proposed sale of stock, potential third-party investments, loans from financial institutions, and even the sale of the company business.
