What is a shareholder dispute?

A shareholder dispute is a dispute between the shareholders (owners) of a company, typically in a business context. For example, there may be a dispute as to how a business is run and managed, the division of responsibilities or the amounts shareholders receive.

Shareholder disputes are more common than one might expect, so it is important that you consider setting up safeguards at the outset.

Shareholder Agreements

A carefully drafted shareholder agreement could prevent a shareholder dispute or save you time and money if one occurs. Our team can assist you with drafting a shareholder agreement that protects your needs as a shareholder, and the needs of the company. We recommend that you seek legal advice early as it is easier to negotiate shareholder agreements at the start of a venture.

Resolving shareholder disputes

Shareholder disputes are often resolved through negotiation to prevent the cost and uncertainty of going to litigation. In a negotiation, shareholders meet to explain their position in the hopes of coming to a compromise solution. Negotiations are particularly useful if you have an interest in preserving a relationship with the other shareholder/s. Our team can assist you with negotiating a favourable outcome that is also commercially sensible in practice.

Litigation may become necessary if there is no shareholder agreement and negotiation is not possible. Some of the reasons for which shareholders have commenced litigation include:

1. Experiences of ‘oppressive conduct’;

2. Breaches of director’s duties; and

3. Applications for the winding up of the company.

However, there may still be reasons why these litigious options are not viable or commercially sensible in practice.

Our team can assist you with determining the most appropriate course to resolve a shareholder dispute. Seek legal advice early on in your dispute to increase your chances of a successful outcome.