3 Ways to Handle Shareholder Disputes

There are many people involved in running a business from management to staff to shareholders. Often disputes arise, especially when shareholders think management is making poor business decisions that affect their income from the business. When disputes arise they often need to be handled by a commercial lawyer, but there are some other methods that can be used to get the issues solved quickly and cost-effectively.

  • This is when an independent mediator is used to help the parties involved make good decisions. The mediator doesn’t make the decisions; their expertise lies in facilitating discussion and defusing tense situations that do nothing to help get the matter resolved. An independent mediator is a neutral party who is not affected by the outcome of the dispute; this is why both parties feel they can be trusted.

  • This is when an arbitrator is appointed by the court and after considering the situation they make the decision. The decisions they make are legally binding on the parties involved in the dispute. This is considered to be cost effective and a much faster way of resolution than allowing the matter to go through a court process of litigation.
  • Negotiation is seen as the quickest and simplest way to resolve a dispute. The parties involved must discuss and negotiate between themselves to reach a solution they both agree with. It is only when no agreement can be reached that other methods must be tried.

No matter how the dispute is tackled, it is essential that privacy be respected and confidentiality imposed. Once the matter goes to court and the media gets hold of it, the result can be loss to the company as the value of shares is likely to fall.  This affects not only the company but the shareholders, so both parties can see the need for confidentiality is highly important.

Choosing negotiation between the disputing parties should be the first step and only when this fails should a mediator be called in. If the dispute still cannot be resolved, the matter can go onto arbitration. At this level, matters are taken out of the hands of the disputers, although their points of view will be taken into account in reaching the final decision.

A commercial lawyer can help and advise in many matters where disputes seem difficult to resolve, helping the company to a speedy and successful resolution so that the matter can be settled and the business can continue to grow in a way that is satisfactory to everyone.

Ongoing disputes leave many people disgruntled and can end up becoming public knowledge. This can harm the reputation of the company in a way that is difficult to overcome and can cause loss for many years into the future.