Brown Borkowski & Morrow


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Quick action necessary in shareholder disputes

Regardless of the size of the business, shareholder disputes can happen at any company that is operating as a corporation.

While Michigan businesses with shareholders hope that doesn’t happen, the high-stakes financial aspect of the scenario makes it happen more frequently than one might think.

Common reasons for a shareholder dispute

Disputes come in many forms. Along with disagreeing about the direction of the business, such as a reorganization or management methods, the following also rank high.

  • Shareholder agreement violations
  • Breach of fiduciary duty
  • Compensation inequities
  • Fraudulent activities
  • Conflicts of interest
  • Disadvantages to minority shareholders

When a dispute does happen, finding a solution quickly may make all the difference. Not taking action quickly often leads to the dispute escalating, making it even harder to equitably resolve.

Potential solutions

Businesses need to take any shareholder dispute seriously. After a shareholder broaches their concerns, go over the shareholder agreement with a fine-tooth comb. Many times, the fine details get overlooked, providing a quick and easy solution.

If the shareholder agreement has no set dispute resolution procedures, businesses have several avenues to take. While every situation has its unique nuances, starting with a discussion at a general meeting may help better flesh out the issue. Or, hire a mediator for dispute resolution. In other situations, the seriousness of the dispute may require legal action. Depending on the situation, it may mean a filing a lawsuit to seek a buyout, to attempt to force a sale of the company, or to obtain monetary damages or another resolution.

Once a dispute comes to light, the value of the company often plays a key role. Businesses should seek an independent valuation by a USPAP-certified appraiser.