Shareholder disputes can happen for many reasons. Sometimes they occur because different people disagree on the company’s direction. Other times, they can occur because one or more shareholders have breached an agreement. Money is often at the root of shareholder disagreements. This can either be the way that the company is spending money, or it can be the compensation that shareholders are receiving. In some cases, minority and majority shareholders disagree. Regardless of the disagreement, the most serious ones often get others involved before being settled.
Alternative dispute resolution to settle shareholder disagreements
Shareholders can use arbitration and mediation to settle disputes. Usually, the burden of proof is lower with alternative dispute resolution. Therefore, resolutions often occur faster. The person hearing the argument often has a more flexible schedule. There is usually no appeals process, with the person hearing the case making a final decision. Often, these proceedings are more amiable than those in front of a judge.
Litigation to settle shareholder disputes
Shareholder disputes sometimes get settled in court by a judge who applies business law to the facts of the case. A significant advantage is that there is an appeals process, so if the losing party feels they got a bad deal, they can force the issue to a higher court. Many cases that appear to be heading to court settle out of court, but the parties must consider the possible cost of hearing their case in multiple courtrooms. While the arbitrator will keep the information private, courtrooms are usually public.
Shareholder disputes occur for various reasons and are settled through arbitration or litigation.