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Avoid these 3 common causes of shareholder disputes

On Behalf of | Sep 25, 2020 | Business Litigation |

Shareholder disputes are disputes that arise when shareholders are unhappy with the way your business is run or how the business has been represented to them. Generally speaking, shareholder disputes can be caused by the following three issues:

  • Irresponsibility
  • Financial trouble
  • Conflicts of interest

For example, certain shareholders in the company may believe that others are not doing what they should to perform the duties assigned to them within a timely manner. They might believe that the company is not being run as efficiently as it should be by all parties. This irresponsibility, in some people’s views, can be problematic and cause disputes.

Another issue that can cause problems with shareholders is financial trouble. If the company doesn’t have a strong grasp of its financial obligations or doesn’t keep the shareholders updated on its finances, then shareholders may raise a dispute. Avoid this by providing the correct reports to shareholders at regular intervals.

Finally, conflicts of interest can cause major problems for businesses. Shareholders who have different ideas about the direction the company should go in may run into disagreements.

The best way to avoid shareholder disputes is to have a strong understanding of the path your company will be going in. Being straightforward with finances and making sure that all shareholders get the appropriate say in the direction of the company is important. Any issues shareholders raise should be addressed early on, so you can avoid those concerns turning into a major dispute down the line. While it might be frustrating to deal with complaints or criticisms, doing so early is better than ended up in court.