Business AdviceLegal Advice

Why Shareholder Disputes Should be Settled Quickly


Running a business brings with it a lot of responsibilities and hard work and sometimes things go wrong.  Often disputes arise between the directors and shareholders or between the shareholders themselves that can only be settled by consulting commercial lawyers. Commercial Lawyers Perth advise that it is important to try and settle the dispute outside of court because the judge has the power to wind up the business completely if they think this is the only way to settle the dispute.

Consider the case of two or more friends who started a business together and didn’t even think about drafting up an agreement about what would happen if one partner wanted out, or what would happen if one stopped pulling their weight. Often the problem may have been allowed to go on for months or years until bad feeling becomes set like cement and the two cannot work together any more.

The best way to settle disputes is to tackle them when they first arise, rather than letting them get out of hand. Dispute negotiation and good communication between those involved can often resolve the matter. If it does not, mediation with neutral third party to calm tempers and see that justice is done can sometimes bring agreement. When this, too, fails it is time for judicial arbitration. Unfortunately, at this stage the parties have to comply with the judgement passed down, even if it is to wind up the business.

Very often the first time a commercial lawyer is consulted it is almost too late for an amicable settlement. The shareholders of a small business may be dismayed to find that since they failed to make legal provision for such an event, that there is no way to force one shareholder to sell their shares to a partner or any other shareholder.

No resolution may be found for the problem unless both parties can agree to some kind of deal, whether one decides to sell out his share or another agreement for the problem is reached. That is why it is imperative for every business, no matter how small, to establish the many legal agreements that are needed, including an exit strategy and a strategy for dispute management.

Once these are in place you can have peace of mind that disputes won’t get to the stage of dissolving the friendship or the business.

When two or more people have worked hard to make their business a success, it is a shame to see it wound up due to some shareholders dispute, but sometimes it is the only fair way to deal with things. The trouble is that litigious proceedings are costly in many ways and the people who were once good friends may never speak to each other again.