Recognising the Signs of a Shareholder Dispute
It’s great to run a business with friends, associates, or partners; however, sometimes shareholders can find disputes surfacing. It is much better to nip these hiccups in the bud before they snowball into concrete legal tussles, greater solid monetary damages, and interference with your business activities. What, then, are some of the telltale signs that trouble could be brewing within a shareholder? Let us enumerate these signals.
Communication Breakdown
One of the first major indicators of shareholder trouble is, in many instances, a gross breakdown in communication. If discussions started to take a different tune, emails went unanswered, and the shareholders began to avoid meetings or one another, it is clearly a warning signal. Well-meaning companies operate on open and frank communication; therefore, if, all of a sudden, the company is not operating in that manner, there is bound to be tension and disagreement over how the company is really being directed or managed.
Differing Visions for the Future
Shareholders might have begun together, but as time proceeded, the shareholders grew to have irreconcilably different visions for the future of the business. While these differences may at times include disagreements over growth objective preferences, investments, dividends, etc., in the ultimate analysis, such differences can build up great potential for conflict and, thus, an impasse.
Questioning the Way Things Are Run
Disputes often arise from dissatisfaction with how the business is managed or concerns about the behaviour of specific directors or shareholders. Allegations could comprise mismanagement, breaches of fiduciary duty, lack of transparency in financial reporting, and even self-interest at the expense of the company being affected by such allegations. When confidence in the leadership starts to wane, shareholder disputes are rarely far behind.
Breaches of Agreements
A shareholder agreement is a form of contract that details precisely what rights and responsibilities each shareholder has. Any breach on the part of one or more shareholders would create a possible trigger for dispute. Examples may range from failing to contribute capital amounts to doing anything against the agreement stipulations.
Seeking Legal Advice Early
It is of utmost importance to recognise these signs as early as possible. These signs, when ignored, will permit trivial quarrels to develop into a full-fledged legal battle. If you are observing an issue or any of these issues within your shareholder group, seeking legal advice sooner rather than later will give you options for early intervention to resolve the issues long before they get way out of hand.
Worried about potential disagreements amongst your shareholders? Don’t wait until it’s too late! Reach out to a shareholder dispute lawyer such as Velocity Legal today to understand your rights and explore proactive strategies for conflict resolution.
