How to Handle Disputes with Shareholders

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Disputes between shareholders can be caused by many different things, so being able to identify the most common types of trustee disputes and know how to resolve them is very important. It is important to understand the rights of all parties and the different options available so if a problem cannot be resolved straight away, it can at least help to prevent things from getting worse.

 

Types of Disputes

A few of the most common types of disputes include:

  • Poor personal relationships and disagreements
  • Lack of performance from a particular party
  • Disagreements over key developments within the company
  • The terms of certain contracts
  • Unfair treatment
  • Uneven distribution of company profits


How to Prepare for Disputes

Knowing how to prepare for disputes and hopefully avoid them can save you a great amount of money, time and annoyance. So, there are a few things you can do to help avoid disputes in the first place:

  1. Make sure details are confirmed in writing. Many disputes occur due to the lack of clear agreement or procedure being in place for people to refer to. Having a written confirmation of any agreements will cover the backs of all parties. Make sure that everything put into writing has been confirmed by anyone relevant. When developing contracts, it is advisable to seek legal advice.
  2. Develop good communication and relationships. Something sure to help avoid business disputes is to have a regular and healthy relationship with shareholders. Ensure all shareholders are encouraged to report any issues, and that procedures are put in place to solve them as soon as possible. Ignoring problems can make things escalate very quickly, so make sure to always look into any problems in depth which can help to avoid disputes in the future.
  3. Train your staff. In relation to the last point, making sure that staff know how to handle complaints effectively, professionally and appropriately. It might be a good idea to have a document outlining the steps to take when a complaint is made. If staff can professionally deal with complaints quickly and reach a good resolution for both parties, then a dispute is far less likely to occur.
  4. Read contracts before signing anything. Before signing a contract or having shareholders sign a contract, ensure that every element of the contract is understood. This will help to avoid any disputes in relation to unfair terms in contracts, which can get really messy if taken to court. Cover your back and make sure that contracts are thoroughly read and understood.
  5. Be organised. Ensure anything agreed is documented and stored in an organised manner, so in the event that proof is needed if a complaint is made, you can quickly locate the relevant documents.  
  6. Know legal obligations. As a business owner, make sure you are aware of your responsibilities and ensure that you live up to them. This will help to avoid disputes and unnecessary costs for the business.

 

How to Handle Disputes:

If the elements put into place to prevent disputes were ineffective, then there two main ways to resolve the dispute quickly and effectively.

The first of the two is mediation, which is a method of resolving disputes through the use of a third-party mediator, who help to reach a settlement. Usually, this mediator does not have authority to make a binding decision. Many people favour using mediation as it is private and confidential, offers a new point of view, is cheaper than a long and expensive trial, and the chance of the dispute quickly being moved past is higher as it considers both sides and will reach a mutual agreement.

The second option is using arbitration, in which the dispute is submitted to someone impartial who makes a binding decision. Some prefer this method as it is more formal and therefore may be seen as more secure, as a mandatory decision is made.

The main difference between the two is that mediation is used to resolve misunderstandings more, whereas arbitration is more commonly used to reach a decision in a dispute. Depending on the nature of the issue, be sure to consider both options.

 

Conclusion

Usually, there can be space for both arbitration and mediation within a dispute, but to avoid both of them by preventing disputes in the first place is the best option. Identify potential disputes and know how to prepare for them to avoid them happening at all. In the unfortunate case that a dispute cannot be preempted, know the different paths you can take in overcoming it as quickly and efficiently as possible.

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