A dispute between the Company and a shareholder can cause significant tension and unrest. These types of disputes can take many forms related to company management, operations and dealings among shareholders and the company. These disputes include:
• Shareholder actions against executive management;
• Breach of fiduciary duty;
• Minority shareholder rights;
• Executive compensation disputes;
• Shareholder appraisal rights.
We previously discussed why having proper corporate formation and documentation when starting a business is essential. Shareholder Agreements (setting forth shareholder rights, responsibilities, and detailed procedures relating to certain disputes and share transfers) go a long way to solidify the proper conduct, manner, and procedures when corporate issues arise. Although such agreements are optional, they are crucial when disagreements occur.
If negotiations regarding a shareholder dispute fail, litigation may be your next option. However, litigating a dispute is never a simple decision. No matter what side of the matter you are on, it is imperative to weigh the costs and benefits of all outcomes of a trial. The decision to litigate requires a thorough analysis and careful assessment of many factors often overlooked by attorneys who do not take the time to understand the client’s goal. For example, it is important to consider the length of the litigation process and how that may divert your attention from more important matters such as revenue production and profits, the effect litigation may have on other business relationships, and how the public may perceive your position, and the probability of succeeding or losing on the merits of the matter.
If litigation is required, collaborating closely with clients is essential to understand the issues most important and to have a basic understanding of the court process and procedure before proceeding with a lawsuit. This practice enables us to develop a litigation strategy that will be most effective and tailored to each client’s needs.
