There are many reasons why disputes may arise between shareholders, such as differing opinions on how to operate and grow a business.
Sometimes, a dispute will lead to litigation. This can be expensive and time-consuming, even if it’s taken to arbitration.
This typically results in a lengthy process during which each party can struggle to come to a practical solution.
Although these disputes may seem inevitable, there are steps you can take to prevent or resolve them before they become major issues.
Shareholders Agreement
Do you have a solid shareholders’ agreement in place? If not, it is vital that you prepare one.
The agreement should be created right from when you start your business so that you are prepared for future conflicts.
The first step in producing an agreement is to elect the subjects the agreement should cover, whilst noting that content may change depending on the needs of those involved.
Typical areas covered by a shareholder agreement include:
- Board structure
- Schedule of meetings
- Reserved matters
- Selling and transferring shares
- Restrictive covenants
- Compulsory transfer of shares
A simple, straightforward agreement will be suitable for some, whereas a detailed, more complex agreement will be better for others.
Irrespective of the agreement’s intricacy, all appropriate bases should be covered.
Businesses are not required by law to have a shareholder agreement and many owners assume the articles of association prepared during the creation of a company are sufficient. However, these often do not go into enough detail to protect the interest of each shareholder.
Dispute resolution policy
To avoid and resolve any issues, it is also essential to create a clear and concise dispute resolution policy.
Your policy should promote open communication, allowing people to express their thoughts and minimise conflict before it spirals out of control.
You must also outline how disputes will be handled if they do arise, as well as how those affected can report such instances.
It is always advisable to seek professional guidance when establishing a shareholder agreement and dispute resolution policy.
That is where we can help you.
For help and advice on shareholder disputes, contact us today.