I have a serious disagreement with my partners or fellow shareholders in a business.
The first thing is: do not escalate the dispute. Things can be said in anger that can never be taken back and which only result in an even stronger response. We have seen small issues spiral into huge problems. It is a good idea to always keep in mind the possibility that you might be wrong or that at the least there are two sides to the story.
Some disputes are just misunderstandings. If you and your partners are having a financial argument, your first step should probably be to get together with your accountants to go over the financial statements of the business and review the financial affairs generally.
Disputes sometimes arise over sharing the work and sharing the profits. Some disputes are simply about personalities who can no longer work together for reasons not directly related to the business. Before taking any steps you need to realistically assess everyone’s contributions to the business, including your own, and your alternatives to the current situation.
If you think that you would be better off out of your current situation, a lawyer can advise you on your rights, can help negotiate a parting of the ways or, if need be, go to court to force a parting of the ways. The lawyer who regularly advises your company or partnership will probably have a conflict of interest in advising one shareholder or partner against another and you will need to find a new independent lawyer.
When you make an appointment to see a lawyer to discuss a shareholder or partnership dispute you should come prepared with year end and current financial statements, any shareholder or partnership agreements, and any letters or emails that show the dispute. At some point the lawyer will probably tell you to get advice from an accountant on the tax consequences of your proposed course of action.
One way to avoid disputes or minimize their consequences is to have a written shareholders’ or partnership agreement. Such an agreement can set out:
- who will put in the money to finance the business;
- what level of effort is expected from each investor;
- how will decisions be made and what decisions will require unanimity; and
- when and to who will money be distributed.
A lawyer can help prepare such an agreement.