William Kolb, founding attorney of the Law Offices of William M. Kolb LLC, has been successfully resolving business disputes for over 30 years. He has a well-earned reputation as an excellent legal advocate and a dedicated problem solver. One type of business dispute he handles is shareholder disputes. If you are involved in a shareholder dispute anywhere in Rhode Island, contact William Kolb for prompt, professional resolution.
What Types of Conflicts Precipitate a Shareholder Dispute?
The majority of shareholder disputes involve conflicts between majority and minority shareholders. In most cases, majority shareholders feel that minority shareholders impede company progress, and/or minority shareholders feel pressured by those in the majority to take steps that they believe are risky or financially unwise.
As in many other situations, the imbalance of power can cause unrest, arguments, and instability. Let’s take a look at some of the specific issues that result in shareholder disputes:
1. Breach of the Shareholder Agreement
Breaches of shareholder agreements include the following:
- Shareholders selling their shares in violation of the agreement’s stipulations, especially if that sale is to a competitor
- One shareholder’s attempt to terminate the agreement in the face of objections by other shareholders
- Breaches of the articles of association in which contractual obligations are not met
When such breaches occur, having an experienced, knowledgeable shareholder dispute attorney can mean the difference between a battle that may damage or endanger the company and a smooth pathway to resolving the dispute.
2. Disagreement About the Direction of the Company
Such disagreements may involve:
- Whether the corporation should expand, downsize or cease operations
- The possible termination of non-shareholding employees
- Relocations of the business
- Large expenditures in costly property, equipment, etc.
In many situations of this kind, minority shareholders may feel that majority shareholders are violating their fiduciary obligations and leaving smaller shareholders at financial risk.
3. Fiduciary Misconduct:
Legally defined fiduciary duty requires majority shareholders to be transparent and honest with all other shareholders. Trouble frequently starts when the former have conflicts of interest and withhold vital financial information from other shareholders. This can, of course, be detrimental to minority shareholders, precipitating confrontations between the two. It should be noted that such disputes needn’t take place between majority and minority shareholders but can occur between other factions of company shareholders.
4. Shareholder Oppression
As time passes, minority shareholders in private corporations often become increasingly aware of the imbalance of power that exists between them and majority shareholders, realizing that they have little clout in decisions that affect business structural changes, management, growth, and large expenditures.
Many minority shareholders may feel that their investment in the company is controlled by the majority shareholders who have only their own best interests at heart. Minority shareholders may bring lawsuits against majority stockholders for:
- Failing to issue dividends
- Using corporate funds to pay family or personal expenses
- Failing to permit those with less power to inspect corporate financial documents
- Attempting to pressure them to sell their shares for an unfair price
- Other shareholder agreement violations
Also, in family businesses, non-family members may feel that they are being treated unfairly due to nepotism. As you can see, there is a definite overlap between fiduciary misconduct and shareholder oppression. In both cases, having a strong, diplomatic shareholder dispute lawyer like William Kolb can be invaluable when it comes to protecting your rights and maintaining the integrity of the company.
5. Inequities in Shareholder Compensation
Although shareholder employers should be compensated in measures corresponding to their levels of experience, training, and productivity, this does not always happen. When it doesn’t, there may be an outcry from those who feel cheated.
If you are paid less, for example, simply because you are not a relative or close friend of the owners of the company, you have a legal right to complain. The same is true if you work noticeably harder (e.g. longer hours, shorter breaks, greater productivity) than a coworker/shareholder who is receiving greater compensation. In either case, you are entitled to a reckoning.
An Ounce of Prevention
To avoid a shareholder dispute of any kind, your best defense is to have a well-crafted shareholder agreement in the first place. In Rhode Island, you won’t find a better attorney to assist you in this matter than William Kolb. He has the in-depth legal knowledge and insight to make sure your shareholder agreement is carefully worded and covers all possible issues that might lead to conflict or dispute.
Resolving Shareholder Disputes
William Kolb has the knowledge and experience to resolve shareholder disputes efficiently and effectively. First attempts to do so include options for arbitration or mediation — alternative methods of dispute resolution. If neither provides a settlement, Attorney Kolb will assist you in filing a lawsuit seeking, depending on circumstances, the removal of a director, the appointment of a new director, a buyout, or some other legal remedy.
He knows how divisive shareholder disputes can be and how detrimental to a company’s stability and has a remarkable ability to apply practical solutions to problems that may at first seem unsolvable.
Contact Our Experienced Shareholder Dispute Attorney Today
Once you get in touch with us, you will feel the ease that results from putting your legal problem in capable hands. The Law Offices of William M. Kolb will provide you with personalized attention from the lead attorney himself. Contact us now so he can begin setting your dispute while vigorously protecting your rights.