DJM Solicitors

How to deal with shareholder disputes

With great responsibility comes great pressure. This means disputes between shareholders, directors and business partners can arise when least expected. Advice should be sought as early as possible in a dispute to minimise disruption and cost to a business.

Here are some of the legal documents that can be put in place to cover many of the areas of dispute that can be predicted:

Shareholders’ agreements

A shareholders’ agreement can set out the course of action to take should a dispute arise between shareholders. These contracts might set out how other shareholders can buy out an unhappy shareholder. Contracts should also hold restrictions preventing former employees from starting a competing business, poaching staff or clients.

Partnership agreements

Business partnerships are usually born from two people having known each other prior to starting their business, which means they are very rarely established with written agreements about aspects such as management control.

Without these agreements, profits, losses and control is shared equally between partners and individuals can be held responsible for the debts of the business.

If a partner was to leave without a partnership agreement in place, the partnership could automatically dissolve.

How to deal with a dispute

Negotiating a solution is always much better, both for the company and the individuals involved, than taking legal action in court. There are many alternatives to legal action that should be attempted initially.

For more information, see here

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