Shareholder Dispute Lawyers

Shareholder Disputes in Australia | Causes, Prevention and Resolution

Rebecca-CampbellAuthor: Rebecca Campbell, Progressive Legal

shareholder disputes

In Australia, shareholder disputes can arise for various reasons, including disagreements over the direction of the company, differences in management decisions, and personality conflicts.  

These disputes can be expensive, time-consuming, and damaging to the business. Engaging a shareholder dispute lawyer is crucial in identifying the causes of these conflicts and implementing strategies to prevent and resolve them effectively.

Find out more about resolving shareholder disputes on this page.

Shareholder Dispute Lawyers

Our skilled team of dispute resolution specialists are dedicated to resolving shareholder disputes efficiently and effectively. Reach out for a free, no-obligation quote and let us help you to protect your interests.

What are the causes of shareholder disputes?

Shareholder disputes can be caused by a range of factors, including: 

Difference in opinion

Shareholders may have different views on the direction or management of the company. These differences can lead to conflicts and disputes.


Shareholder disputes often arise due to oppression from other shareholders and directors where the affected shareholder claims to have been pushed out of the company or prejudiced by the actions of other shareholders and directors. 

Poor communication

This can easily lead to misunderstandings and disputes. Shareholders may not be aware of the decisions made by the board of directors or may not have adequate information to make informed decisions.

Breach of director and fiduciary duties

Disputes may arise concerning various breaches of director duties or fiduciary duties of directors of the company.  

Prevention Strategies 

To prevent shareholder disputes, companies should carefully consider in detail how the company is to be operated and should consider implementing the following strategies: 


The shareholders should carefully go through all the provisions of their constitution to ensure that the operation of the company and the duties of all the officers and members is clearly set out

Shareholder agreements

Shareholders should instruct an experienced corporate lawyer to prepare a shareholders agreement for the company to define the rights and obligations of each shareholder, director and other members, including voting rights, decision-making authority, dispute resolution procedures and buy-sell provisions

Regular communication

Regular communication between the board of directors and shareholders can help to prevent misunderstandings and disputes. Companies should provide timely and accurate information to shareholders, including financial reports, minutes of meetings, and other relevant information.

Dispute resolution procedures

Companies can set out in their constitution and shareholder agreements alternative methods of resolving disputes before formal court proceedings are commenced. Court proceedings are expensive and damaging for companies. Often disputes can be resolved by way of alternative methods such as negotiation, mediation or arbitration.

Clear governance structure

Companies can set out precisely a detailed governance structure in their constitution and shareholder agreement that can help to prevent disputes over management and control. Companies should define the roles and responsibilities of the board of directors and all officers.

Due diligence

Before investing in a company, shareholders should conduct due diligence to understand the company’s financial position, potential risks and the operational structure of the company. Shareholders should carefully consider all of the terms of the company’s constitution and shareholder agreement before investing in the company.  

Resolution Strategies 

When a dispute arises, companies should consider implementing the following strategies to resolve the dispute: 


Negotiation is often the first step in resolving shareholder disputes and often the parties may be able to reach a resolution between themselves or through their lawyers without the need for formal litigation.


If initial negotiations do not resolve the dispute, mediation is a good way to try to resolve all disputes between the parties with the assistance of an independent Mediator who facilitates the mediation and often the parties can reach terms of agreement that they may not be able to achieve through court orders.


If the company/directors/shareholders can’t reach a resolution, arbitration is a more formal means of dispute resolution but it can be quicker and is less formal than Court proceedings.


If all other options fail, shareholders may resort to filing proceedings at Court. Litigation can be expensive, time consuming, and can damage the reputation of the company.

Shareholder dispute FAQs

What is a shareholder dispute?

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.

What is an example of a shareholder dispute?

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.

How do you resolve shareholder disputes?

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.

What are the common causes of shareholder disputes?

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.

Can a shareholder have a conflict of interest?

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.

How do you remove a bad shareholder?

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.

Do shareholders have more power than directors?

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.

What rights do minority shareholders have in a dispute?

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.

What happens in 50/50 shareholder disputes?

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.

What should I do if I'm involved in a shareholder dispute?

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.

The Key Takeaway

shareholder dispute lawyers sydneyShareholder disputes can be costly and damaging to a company’s reputation. Companies should implement strategies to prevent and resolve disputes, including the preparation of carefully considered constitutions and shareholder agreements detailing all the rules and obligations of the company, its shareholders, directors and other officers of the company.  

When a dispute arises, negotiation, mediation, and arbitration are all possible resolution strategies that can be used to resolve disputes without the need for formal Court proceedings.

By understanding the causes of shareholder disputes and implementing appropriate prevention and resolution strategies, companies can protect their interests and ensure the long-term success of the business. 

Shareholder Dispute Lawyers

If you need expert legal advice with regards to shareholder disputes feel free to contact our experienced corporate lawyers on 1800 820 083 or feel free to make an enquiry below.

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