When you have business partners and/or shareholders, it is quite likely that disputes will arise at some point. Your business will grow, develop, and evolve in new and potentially unexpected directions. With multiple parties at its helm, it is not always easy – or realistic – to be in agreement about everything regarding the company.
A dispute between partners or involving a company’s shareholders can substantially hinder or even destroy a company. Before you sign a partnership agreement or make your company public, it is important that you develop an effective strategy for handling these kinds of dispute in the event they arise. An experienced Appleton business lawyer can help you draft this document and navigate your relationships with all other parties involved in the company.
Between business partners, many different types of dispute can arise. These include:
Shareholder disputes can sometimes look quite similar to partnership disputes, but the difference is that rather than being between two or more partners at the head of a company, they are between a company’s ownership team and the shareholders who have invested in it. A shareholder dispute could stem from a dispute between partners or it can trickle “upward” to the partners at a company. A few examples of issues that can cause shareholder disputes include:
The most effective way to manage partnership and shareholder disputes is to create guidelines for dispute resolution in your partnership and shareholder agreements. Often, these agreements specify that disputes are to be resolved through arbitration or mediation, rather than litigation. This keeps resolution costs lower for all parties involved and can reduce the negative personal feelings individuals involved in the dispute might experience through litigation.
In arbitration, an arbitrator, which can be an individual or a panel of individuals, presides over the case and makes a final ruling after hearing each involved party’s side of the disagreement. Your partnership or shareholder agreement can specify how your arbitration is handled, but typically, it follows the same procedure as a trial: each side presents its evidence and argument, witnesses may testify and be questioned, and the arbitrator considers all facts presented to determine an appropriate remedy for the conflict. An arbitrator’s ruling may or may not be legally binding, depending on your agreement.
With mediation, the two conflicting parties work with a neutral third party to resolve their differences and determine an appropriate remedy for the dispute. Through mediation, the parties reach an agreement under the mediator’s guidance, rather than having the mediator determine the agreement for them.
In your partnership agreement, be sure to include the following at the bare minimum:
A solid shareholder agreement is as important to your company’s success as its partnership agreement. Your shareholder agreement should include the following provisions as well as any others your lawyer advises you to include:
Whether you are currently facing a shareholder dispute in Wisconsin within your company, between your company and its shareholders, or if you are starting a new business or partnership and you want to create guidelines to prevent or manage disputes that could occur in the future, work with an experienced business lawyer. Contact our team at Hammett, Bellin & Oswald, LLC today to set up your initial consultation with our firm, during which we can examine your case and guide you toward a productive course of action.