Protecting your interests in a shareholder dispute
Shareholder disputes with your Toronto business can arise for a number of reasons. There could be disagreements over the direction of the business, dishonesty on the part of controlling or minority shareholders, discrepancies in compensation, or a number of other causes.
When becoming a shareholder in a company and if involved in a shareholder dispute, it is important to take the following into consideration:
It’s Best to Secure Your Interests Before They are Threatened.
As a shareholder, your shareholder agreement is your first line of defense. Shareholder agreements outline how the company should be operated and managed, and defines the rights, obligations, privileges, and protections of the shareholders.
An effective shareholder agreement should anticipate events that are reasonably likely to occur in the future of the company and its shareholders, and how those events will be handled. In particular, the shareholder agreement may detail how a dispute is to be handled and a method for a shareholder buyout.
When a dispute occurs between Toronto shareholders, the first step is to consult the shareholder agreement. For that reason, shareholder agreements should always be formally prepared by a lawyer, and reviewed or updated when any relevant changes occur within the company.
Mediation vs. Arbitration
When a dispute cannot be resolved without intervention, mediation and arbitration may be good options.
In a mediation, both parties assemble with an impartial mediator to isolate disputed issues in order to develop alternatives to ultimately reach a settlement. Often mediators will privately request settlement proposals from each of the parties. The mediator then meets with each party to determine their reaction to the proposal and their counter-proposal, if any. The mediator continues to meet separately with each party in an attempt to reach a settlement unless the mediator believes a group meeting would be beneficial.
Arbitration, on the other hand, takes place before a neutral third party (an arbitrator) who will review the evidence and provide a decision which is binding on the parties. Arbitration can be a good option over the courts when the parties wish to resolve the matter in a confidential setting. Further, arbitrations are generally quicker than the court system and the parties can select an arbitrator for their experience and expertise in resolving shareholder disputes.
When a shareholder dispute cannot be resolved by negotiation, mediation or arbitration, final resolution by the courts may be required. It is important to keep in mind, however, that the court system may be slow, is public, and can generate significant fees and negative publicity for both parties.
Have a Toronto Damages Quantification Specialist in your Corner
Whether you’re at the early stages of a shareholder dispute, or preparing for mediation, arbitration or court, a Fuller Landau Damages Quantification specialist can help. Call us today to schedule a complimentary consultation.