Shareholder Arbitration and Litigation
Shareholder disputes are serious events and are often a harbinger of serious institutional problems that can jeopardize not only the continued profitability of the business, but also its viability. Shareholder disputes can arise for many reasons. In some instances a single shareholder may believe that it’d be financially or otherwise advantageous to terminate the shareholder relationship. In other circumstances a minority stakeholder may vehemently disagree with a position or action taken by the majority of shareholders. In still other scenarios one or more shareholders may allege that illegal or fraudulent activities are occurring and being ordered by majority stake holders.
Regardless of the reasons for a shareholder dispute, important issues that affect the company’s and investor’s bottom-line are in play. If mismanaged, these issues can derail a company from its objectives and goals. However, the experienced attorneys of Meredith & Narine ae experienced in handling shareholder disputes. Our dedicated and experienced team can provide the independent perspective needed to settle disputes. Depending on the circumstances we may recommend engaging in alternative dispute resolution or, for matters where settlement is unlikely, to litigate the issue.
Careful Planning With a Business Lawyer Can Avoid Shareholder Disputes
Like in most aspects of life, careful planning guided by an experienced business and legal professional can head-off many common disputes experienced by growing companies and large corporations. Furthermore, even if the planning did not address this particular issue, it should have established a framework through which directors and shareholders can constructively engage and interact.
One of the most fundamental steps a business, director or shareholder can take regarding potential future disputes is to draft and execute a valid shareholder agreement. The lack of a valid shareholder’s agreement can lead to management crisis due to unexpected events including:
- What happens if a majority shareholder dies?
- How should the corporation be transferred?
- What are the terms of the buy-sell agreement?
- What happens if a minority shareholder alleges concerns over valuation?
- What happens if a minority shareholder’s employment is terminated?
- What if a majority stakeholder fails to fulfill his or her duties or diverts business to another operation?
- How succession will occur in a closely-held company?
The foregoing addresses only a select number of potential scenarios that can arise. While a shareholder agreement can provide answers or guidance regarding many of these issues, it cannot answer every potential question. Furthermore, even when a framework to resolve disputes exists, the parties may disagree on the facts or other aspects. Working with an experienced shareholder arbitration and litigation attorney can ensure that you engage meaningfully in the process and put your strongest arguments forward.
Mediating or Arbitrating a Shareholder Dispute
Mediation, arbitration and litigation are all distinct legal processes with their own advantages and drawbacks. Depending on the scenario, it may be more or less effective to engage in one type of proceeding over another. If possible, we always strive to select the path that is efficient and more likely to bring the result the minority or majority shareholder desires. The three main types of proceedings that can adjudicate a shareholder dispute are:
- Mediation – Mediations are often less formal than arbitrations or formal legal proceedings in a court. Mediation is driven by a third-party mediator and can be binding or non-binding. A good mediator will identify the strengths and weaknesses of each position and use this information to facilitate settlement discussion.
- Arbitration – Like a mediation an arbitration is administered by a third-party. In this case the third-party is a judicial authority. Arbitrations are typically binding meaning that the parties are required to accept the arbitrator’s decision. The arbitrator works in a fashion that is similar to a judge and both sides are permitted to present their case.
- Litigation – Litigating the matter through traditional court filings and motions is probably the path most people consider initially. While traditional litigation can be effective, it is also an often costly and drawn-out process.
Our experienced attorneys endeavor to select the right litigation tool for your needs and purposes. When you work with our firm, you can rest assured that we will aggressively and strategically advocate on your behalf.
Rely on A Business Litigation Attorney Experience Resolving Shareholder Disputes
The experienced lawyers of Meredith & Narine are proud to represent both minority and majority shareholders in all shareholder disputes or litigation. Our firm is and remains committed to resolving commercial disputes in a cost-effective manner. To schedule a private legal consultation regarding shareholder concerns or other pressing concerns contact our firm by calling 215-995-2769 today.