Disputes in joint businesses are common occurrences. They can arise when shareholders fall out with the management. Also, personal problems may make it difficult to continue holding equity in a company. Similarly, a breach of service contract or fraudulent activities may make it difficult for shareholders to coexist. When any of the things mentioned above occur, it is likely to ruin a business relationship. As such, it is necessary to find a way to resolve the issues. Here are some ideas on how you can resolve such a dispute.
Re-read the shareholders agreement
The article of association has rules governing how shareholders should relate. Read through the articles particularly the one for resolving conflicts. Look at the exit clause and the provision on forcing shareholders to sell their shares. Look at what needs to be done when a shareholder’s contract is terminated. Discuss with the rest of the owners how the article of association can help you to have the issue settled.
Seek help from a non-executive director
You may decide to appoint an independent non-executive director to chair the meeting. Choose a chairman who does not take part in the day-to-day running of the company. They should mediate and try to bring both parties together. Commit yourself to abide by the decision the chairman and his team will arrive at. You may choose a board director to arbitrate on the issue. This works well in a case where there are only two shareholders.
Negotiation
If you are still committed to keeping a relationship, you may choose to negotiate. If you want to avoid the costly legal action which may consume time, you can negotiate for a compromise. To do this, you may need to set aside your legal rights and negotiate for a fair and workable solution. Talk to an experienced solicitor to advise you on what you can do given the circumstances. A settlement to compensate the aggrieved shareholder may be reached. If the company is unable to raise the money for settling the conflict, you can agree to defer the payment to a later date.
Buying out a shareholder
It is also possible for the disputing party to buy the shares owned by the other shareholders. If they have the resources to do this, it can be the best way to end the dispute. An offer is made by the shareholder who wants to buy the other out. The provisions in the article of association could be relied on to make this move. If the internal buyout is successful, it will bring the dispute to an end.
Of course, there are many other ways you may choose for shareholder dispute resolution. But if none of them gives the desired results, the parties may decide to go to court. The court will listen to all the parties and provide a ruling that must be adhered to.
