Business Disputes: It’s What We Do
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What causes shareholder disputes?

On Behalf of | Dec 8, 2023 | Business Disputes

The number of shareholders involved in a business can vary, but the company is answerable to these individuals. Generally, shareholders share similar visions in the sense that they want the company to succeed. Nonetheless, there is not always agreement on the precise steps the company should take to get there. 

Disputes among shareholders are common, and they can cost a business greatly. Outlined below are some of the most frequent causes of shareholder disputes

Minority shareholders feel unheard

As mentioned, companies can vary in terms of the number of shareholders and voting rights that each shareholder has. Often, minority shareholders have lesser voting rights and this can result in disputes if those minority shareholders feel unheard in terms of the direction they want the business to take. 

Additionally, payouts to shareholders can differ. Ideally, these should be proportionate in terms of the effort that shareholders put in and the experience they have in the industry. If a shareholder is paid more but contributes less, this can cause disputes. 

Breaches of fiduciary duty 

Shareholders have a responsibility to put the best interests of the company first. This means conducting themselves professionally, treating other shareholders with respect and not damaging the company by offering assistance to rivals. A breach of fiduciary duty is actionable in law and it can be a source of shareholder disputes.   

Disputes among shareholders can be prevented and remedied by having wateright contracts in place. These contracts can outline the rights of shareholders as well as potential solutions to disputes. When taking significant steps for your business, it’s pivotal to have legal guidance behind you.