Shareholder Dispute Lawyers

A shareholder dispute involves disagreements or conflicts between the shareholders of a company, which can also include disputes between shareholders and the company’s directors or officers.

A shareholder dispute might occur in a closely held corporation where two shareholders, each owning 50% of the company, disagree on the strategic direction of the business.

One shareholder wants to expand the company’s operations overseas to capture new markets, believing it will increase profitability and company value in the long term. On the other hand, the other shareholder is concerned that such expansion is too risky, preferring to consolidate the company’s current market position and focus on increasing dividends.

This disagreement leads to a deadlock in decision-making, as the company’s constitution and shareholders’ agreement did not foresee such a scenario, nor provide a mechanism for resolution. As the dispute escalates, it impacts the company’s day-to-day operations, leading to a decline in employee morale and operational efficiency.

Resolution methods include negotiation, mediation, arbitration, or litigation. The approach depends on the nature of the dispute, the parties involved, and any agreements in place, such as a shareholder agreement.

Additionally, a buyout option may be considered, where negotiations could result in one party purchasing the shares of another at a price agreed upon by both parties.

Our team, based in Sydney, specialises in resolving shareholder disputes by offering tailored advice and effective dispute resolution strategies.

Common causes include disagreements over company management, profit distribution, breaches of shareholder agreements, and issues related to the sale or transfer of shares.

In our experience, shareholder disputes often arise when there’s a perceived lack of transparency or fairness in decision-making processes, especially in closely held companies with a small number of shareholders.

Differences in vision and management style between shareholders can lead to conflicts, as can issues related to the appointment and performance of directors and management. Additionally, disputes may emerge over the valuation and transfer of shares, particularly when a shareholder wishes to exit the company.

An experienced shareholder disputes attorney can help you navigate the dispute resolution process, regardless of the cause.

Yes, a shareholder can have a conflict of interest when personal interests or external engagements clash with the company’s interests.

Examples include:

• holding shares in competing businesses
• influencing decisions for personal gain
• involvement in decision-making roles across companies with conflicting interests,
• family relations affecting business decisions, and
• misuse of insider information.

These conflicts can undermine fair decision-making and harm the company’s interests. Effective management involves transparent disclosure and, where necessary, abstention from related decisions to safeguard the company’s wellbeing.

Removing a bad shareholder typically involves legal and contractual measures.

Review the shareholder agreement and company bylaws for provisions on share transfers, buyouts, or forced removal.

Options include negotiating a buyout, invoking any clauses allowing for compulsory purchase of shares, or, in extreme cases, legal action if their conduct breaches agreements or harms the company.

Professional legal advice with a shareholder disputes lawyer is essential to navigate this process, ensuring it complies with company regulations and the law, while minimising potential disputes or litigation.

In a company, shareholders and directors have distinct roles and powers.

Shareholders, as owners, decide on key structural issues like electing directors, approving significant transactions, and amending governance documents. Their day-to-day influence on management is limited.

Directors, on the other hand, manage the company’s daily operations and strategic direction, making decisions that affect its short-term and long-term success.

Shareholders have the ultimate authority on key decisions but lack involvement in day-to-day management, which is the directors’ responsibility. The balance of power varies, with shareholders typically having more direct influence in private companies than in public ones.

Minority shareholders have rights protected by law, including the right to fair treatment, access to company information, and the ability to take legal action against directors if they act against the company’s interests.

50/50 shareholder disputes represent a unique challenge in the business world, where equal ownership can lead to deadlock situations in decision-making.

These disputes often arise from differing visions for the company’s future, disagreements on financial management, or personal conflicts between shareholders.

Our firm specialises in navigating the complexities of equal shareholder disputes, employing strategic negotiation and mediation techniques to find common ground and devise solutions that respect the interests of both parties.

By focusing on effective communication and equitable resolutions, we aim to ensure the sustained success and growth of your business despite the challenges of equal ownership.

It’s advisable to seek legal advice to understand your rights and options. An experienced shareholder dispute solicitor can help you navigate the dispute resolution process.