Conflict resolution strategies for shareholder disputes
Regardless of the size of the business, shareholder disputes can and do occur. When stakeholders disagree, it can potentially disrupt company operations.
These conflicts might arise for several reasons, and since resolving them is not always straightforward, it is beneficial to avoid disagreement whenever possible.
Reasons for shareholder disputes
Most disputes occur when members disagree about a perceived threat to the security of their stake in the business. Many different situations can result in conflict between shareholders:
- Disagreements over company direction
- Neglected obligations or breach of contract
- Controversial or illegal activities
- Conflicts of interest
- Interpersonal friction
Having a well-written shareholders’ agreement in place can help prevent disputes by providing guidance for running the company and outlining the rights and responsibilities of members.
In addition, many contracts also dictate methods of conflict resolution for when disputes are unavoidable.
Strategies for conflict resolution
When a shareholders’ agreement is unclear about methods of resolution, it can help to know the options:
- Negotiation: Discussing the issue to reach an agreement
- Mediation: Using a third party to facilitate negotiations
- Arbitration: Hiring a third party to settle a dispute out of court
- Litigation: Taking legal action to settle a dispute in court
Understanding the differences between these strategies can help determine the most suitable method for a specific situation.
Even with preventative measures and an excellent shareholders’ agreement, disputes happen. Attempting to resolve them quickly and expediently can save everyone involved time and money while allowing the company to get back to business.