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How to Best Handle Shareholder Disputes

Written on February 28, 2020

The Florida Business Corporation Act allows direct actions by shareholders to enforce their rights against another shareholder, officer, director, or the company, but litigation isn’t always the best route. In fact, a lawsuit would typically be considered a last resort in all but the most egregious circumstances. It’s better to consider and implement other strategies to resolve disagreements, which can result in less disruption and more productive shareholder relationships going forward.

By working with a Clearwater, FL shareholder disputes attorney, you’re in a better position to efficiently, effectively handle shareholder disputes. Some options include:

Pinpoint Specific Areas of Disagreement:

Your first consideration should be working on an identified, defined point at the core of the shareholder dispute. Many disagreements are grounded in problems with communication, which can be often cleared up through pinpointing contested issues. If misunderstandings do run deeper, you’ll still achieve an accomplishment: You’re in a better position to move forward with other approaches to dealing with disputes.

Negotiations in Shareholder Disputes:

In the interest of maintaining relationships, it’s worth the effort to attempt to negotiate a workable solution to your disagreement. Still, all parties must be willing to compromise rather than attempt to enforce their strict legal rights. You should be prepared for some give and take in discussions, which you’re probably willing to do when you realize the alternative may be court action.

Consider Alternative Dispute Resolution:

There are two forms of alternative dispute resolution that may be effective in working out disagreements among shareholders:

  1. Mediation: Through this process, a neutral, trained mediator guides the parties through discussions that facilitate agreement. The expertise of the mediation professional focuses on defusing arguments, so the parties can have productive conversations toward compromise.
  2. Arbitration: This process typically involves a single arbitrator or a panel, who will hear evidence and arguments from both sides of a disagreement. It resembles a trial but is somewhat less formal, which is why it’s more cost-effective than litigation. Note that the findings of the arbitrator ARE binding on the parties – unlike mediation which has no legal effect if the parties cannot reach an agreement.

Review the Shareholders Agreement:

As you’re considering any of the above strategies for resolving disputes, keep in mind that the answer may be in your shareholders agreement – if you’ve executed one. These documents typically address how disputes can be resolved, such as calling a special meeting or voting on a resolution at the next general meeting. Some shareholders agreements will include a clause that requires mediation or arbitration before you can file a lawsuit in court.

Get Legal Help from a Clearwater, FL Business Law Attorney

When you have assistance from a knowledgeable shareholder disputes lawyer, you may be able to avoid costly, disruptive litigation that puts your business at risk. These are just a few options to consider, but there may be other strategies depending on your circumstances. For more information on how we can help, please contact Clearwater Business Law at (727) 785-5100 to set up a consultation. Our team serves the needs of businesses throughout Pinellas County and the surrounding region, so we’re happy to help.

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