In the corporate context, shareholders disputes are integral issues that are common and widespread.
Shareholders disputes may arise in the form of boardroom conflicts, corporate governance-related disputes, breach of fiduciary duties, internal shareholder’s agreement, voting rights or dividend payment disputes, stock ownership disputes and stock transfer disputes.
From the foregoing corporate disputes, the corporate governance conflicts are the most popular. Governance issues can be a fertile source for disputes and conflicts.
Corporate governance conflicts are often unavoidable. It is beyond cavil that corporate disputes would arise on this particular aspect alone.
Customarily, corporate affairs are handled by the board of directors who are shareholders themselves. The board is accountable to the corporation as the principal. All their actuations and corporate decisions must have a direct bearing to the legitimate expectations of the corporate shareholders.
Shareholder’s dispute can be resolved through various mechanisms, short of litigation.
Adequate mechanism may be formulated to address shareholder’s dispute. Mechanism such as mediation, negotiation and arbitration may be formulated as a management tool to strive conflict resolution.
Dispute Mechanism
Mediation deals more on constructive approach that brings to surface the issues of mutual concern. It enables parties to commence into a negotiation.
Negotiation is a voluntary and informal process in which parties identify issues of concerns, explore options for resolution and search for mutually acceptable agreement. In this wise, lawyer representation is permissive.
Arbitration is a private process where disputants agree that their disputes be heard by an appointed individual or body after considerations of evidences and arguments.
However, despite having those alternative mechanisms, it is an inevitable fact, that shareholder’s dispute would more likely end up in litigation.
Litigation would have a final say in resolving the clash of shareholder’s interest, in almost all situations. Litigation in court is the optimum recourse of shareholder’s (specially the minority) in resolving shareholder’s disputes and conflicts.
Through litigation, the conflicts can be well-settled and attain legal ease.
In litigation of this sort, an experienced corporate lawyer may be the right person to deal with.
Whatever avenue were chosen, when a dispute arises, consideration for the best interest of the corporation is primordial. Disputes must be resolved effectively, expeditiously and efficiently.
Taking into account the underlying principle of corporate dealings, which is, “time is of the essence”.
