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How to reduce the risk of shareholder disputes going to court

On Behalf of | Nov 8, 2023 | Business Litigation

The more shareholders you have, the more likely that disagreements occur. It’s only natural that people have different opinions about how to do things.

Yet, it is not in anyone’s interest for a shareholder dispute to get all the way to court. While you cannot always avoid it, there is certainly a lot you can do to reduce the chance of it ever happening.

Provide balance

Not everyone can be a majority shareholder. It requires others who are happy to hold a minority. Yet, to keep them happy, they cannot feel entirely dispossessed of power and at the mercy of the majority shareholder’s whims. Think about how you can structure things so everyone feels they retain a valid voice.

If you are struggling to resolve a shareholder dispute, you may need outside advice to learn more about the various legal and non-legal options available. Taking early action could help limit the potential damage these disputes can cause.

Know how you will resolve deadlocks

If the distribution of shares makes an evenly split decision possible, you must know ahead of time how you will resolve it. Make sure that rule, whatever it is, is made clear from the outset when people invest.

Be transparent and keep meticulous records

Uncertainty can breed suspicion. Make clear records from the outset and ensure all shareholders can access what is appropriate. No one likes to feel kept in the dark.

While prior planning can go a long way to avoiding shareholder disputes, the risk of a legal dispute is always possible. Learning more about your options can help you understand what steps to take next.