Shareholder Disputes: Understanding Your Rights and Resolving Disputes
Shareholder disputes can arise when there is a difference in vision for the company and personal differences between shareholders. These disputes can lead to friction and potentially affect the company’s success. At Achkar Law, our litigation lawyers assist in helping you understand your rights and resolving shareholder disputes to achieve the smoothest and best possible outcome.
Understanding Shareholder Rights
As a shareholder, there are three basic rights that you are entitled to:
- The right to vote at valid shareholders’ meetings
- The right to attend shareholders’ meetings
- The right to have access to accurate and complete information regarding the corporation’s affairs.
These rights are essential for shareholders to make informed decisions and have a say in the company’s operations.
Importance of Shareholder Agreements
Shareholder agreements typically outline how the company is to operate and what the rights and obligations are of the shareholders. Since most companies have varying risks and objectives depending on the nature of their business, shareholder agreements are usually custom and consider the details specific to that company.
Having a well-drafted shareholder agreement can assist with clarifying rights, processes, and shareholder dispute resolution steps in case there are shareholder disputes or disagreements. However, many companies do not have these agreements. In these cases, The Ontario Business Corporations Act and the Canadian Business Corporations Act will apply.
At Achkar Law, we understand the importance of having a well-drafted shareholder agreement. Our lawyers can help you navigate the legalities and ensure that your rights are protected.
Some of the key provisions that should be included in a shareholder agreement include:
- Share ownership: The agreement should specify how many shares each shareholder owns and how they can be transferred or sold.
- Voting rights: The agreement should outline how voting rights are allocated among the shareholders and what decisions require a majority or supermajority vote.
- Management: The agreement should specify who will manage the company and how they will be appointed and removed.
- Dispute resolution: The agreement should provide a process for resolving disputes between shareholders, including mediation or arbitration.
- Exit strategy: The agreement should outline how shareholders can exit the company, whether through selling their shares or other means.
If your company does not have a shareholder agreement, or if your agreement needs to be updated, our lawyers can help you draft a new agreement or revise your existing agreement to ensure that it meets your needs.
Types of Shareholder Disputes
Shareholders can have various disputes when it comes to several aspects of the corporation. Some of the common types of disputes include:
- Sale or Ownership of the Business: Disagreements may arise when it comes to the sale or ownership of the business. Shareholders may have different visions for the company’s future, which may result in a dispute.
- Dissolution of Business: When a company is dissolved, shareholders may disagree on how the assets should be divided.
- Breaches of Fiduciary Duties: Shareholders may have a claim against the directors or officers of the corporation for breach of fiduciary duty. These claims may arise when the directors or officers fail to act in the best interest of the corporation.
- Share Price and Valuation: Shareholders may have a dispute regarding the share price and valuation of the company.
- Bankruptcy: In the event of bankruptcy, shareholders may have a dispute regarding the distribution of assets.
- Shareholder Agreement Violations: Shareholder agreements outline the rights and obligations of the shareholders. If a shareholder violates the agreement, other shareholders may have a dispute.
At Achkar Law, our litigation lawyers provide a no-nonsense approach to providing practical and straightforward advice and litigation help to get results. We can assist with shareholder claims against directors, officers, or other shareholders finding solutions that work for your specific situation. No matter what type of shareholder dispute you are facing, our lawyers can help you understand your rights and options and develop a strategy to achieve your goals.
Resolving Shareholder Disputes
When a shareholder dispute arises, it is important to let the other side know of your issues. This is usually done in the form of a demand letter. If the response is conducive to negotiations, then a settlement may be possible. However, in some instances, the parties want their day in court. In those scenarios, you want a lawyer who can help tackle the issues in a way that still protects you against legal costs.
Mediation is a good place to resolve some or all issues. However, some matters may require discoveries (examination for discoveries) and full-blown litigation to compensate the shareholder for oppressive behavior by other shareholders.
Mediation can be an effective way to resolve shareholder disputes without going to court. In mediation, a neutral third party assists the parties in negotiating a resolution to the dispute. Mediation can save time and money compared to litigation, and the parties can often come up with creative solutions that work for everyone.
If mediation is not successful or not an option, the parties may need to resort to litigation to resolve their dispute. Litigation can be time-consuming, expensive, and stressful. However, sometimes it is necessary to protect your rights and interests.
Our litigation lawyers have extensive experience representing clients in shareholder disputes. We take a practical and straightforward approach, providing our clients with clear and actionable advice. We are committed to finding the best possible solution for our clients, whether that means negotiating a settlement or taking the matter to court.
How We Can Help
At Achkar Law, we have the experience and expertise to help you navigate shareholder disputes. Our lawyers are committed to providing practical and effective solutions that protect your rights and interests. We take a client-focused approach, working closely with you to understand your needs and goals and develop a strategy that works for you.
Whether you need help drafting a shareholder agreement, negotiating a settlement, or litigating a dispute in court, we are here to help. Our team of commercial litigation lawyers would be happy to help you navigate your matter. Contact us at (800) 771-7882 or email [email protected] and we would be happy to assist.