Skip to Main Content

What Are the Most Common Causes of Shareholder Disputes?

In an ideal world, your Florida business would function with such ease and simplicity that the shareholders could sit back and enjoy their good fortune. Of course, for companies operating in the real world, this scenario is highly unlikely. As is the case with any situation involving financial matters, shareholder disputes are common. Unfortunately, while the Florida Business Corporation Act includes many provisions related to shareholders, there’s limited guidance on how to handle disputes when they arise. 

On a positive note, it is possible to resolve disagreements when you retain a Clearwater shareholder disputes attorney to tackle complicated legal issues and aid in productive conversations. Plus, you may be able to avoid or reduce the impact when you know the most common causes of shareholder disagreements.  

Disputes About Managerial Issues: One frequent source of disagreement involves where management is taking the company in terms of direction. Making big-ticket asset purchases, taking on debt, hiring and firing employees, and other decision-making issues – generally, any aspect of management that could increase or decrease the value of their investment – can lead to major conflicts.

Fiduciary Matters and Misconduct: Shareholders of private Florida companies have a fiduciary duty to each other and the company – regardless of what they’re officially employed by the business. Their legal obligations include honesty, candor, loyalty, and other responsibilities related to putting the business interests first. Disputes may stem from accusations about a breach of fiduciary duty, such as self-dealing and engaging in conflicts of interest that affect the company’s interests. In some cases, a breach of fiduciary duty could lead to criminal charges, such as embezzlement or fraud.

Majority Versus Minority Shareholder Disputes: If your company encompasses minority shareholders, disputes with the majority are common. By their nature, minority owners are at a disadvantage because they can be squeezed out of voting and decision making. Their ownership interest is typically restricted in terms of transferring shares, so they cannot sell. At the same time, they have limited say as the majority runs the company – perhaps in ways that adversely affect the minority investment.

Breach of the Shareholder Agreement: Though the subject matter is very unique, a shareholder agreement is nothing more than a contract. Any actions that run afoul of the terms and conditions could result in a contract dispute – and potentially lead to litigation. Examples might be a shareholder selling or transferring shares in violation of provisions regarding restricted shares. Where the agreement spells out the responsibilities of a shareholder, a failure to comply could lead to allegations of breach.

Talk to a Clearwater Business Lawyer About Shareholder Disputes

You may not be able to avoid all shareholder disputes, which is why it’s helpful to consult with an experienced attorney when they arise. In addition, it’s important to work with a business litigation lawyer if a disagreement has already gone to court. For more information on options for resolving disputes, please contact Clearwater Business Law at (727) 785-5100. Our team represents businesses and owners throughout Pinellas County in a wide range of legal matters, and we’re happy to discuss your case.