Slate's Law Blog How to Resolve Shareholder Disputes

When your business is facing a shareholder dispute, or you are contending with the potential outcomes of a shareholder dispute, it is important to have an experienced Santa Fe business litigation attorney on your side. While shareholder disputes do not necessarily need to end up in litigation, it is essential that you have experienced counsel to guide you or your business through the process to a resolution. Shareholder disputes can arise over many different issues, from disagreements about the business to personal matters affecting one of the shareholders. Depending upon the specific facts of the dispute, a variety of resolutions may be possible. The members of the corporation may be able to buy out one of the shareholders, or the parties may be able to negotiate a resolution in which all shareholders continue to have an interest in the business.

If shareholder disputes are not resolved, the business may need to close. However, before the prospect of dissolving your corporation becomes the only solution, you may be able to resolve a shareholder dispute in other ways.

Using Alternative Dispute Resolution to Resolve Shareholder Disputes

Alternative dispute resolution (ADR) in the form of arbitration or mediation can allow a company to resolve a shareholder dispute without needing to go to court. However, it is important to understand that arbitration and mediation are quite different from one another even though they are both forms of ADR. With arbitration, the parties will present their issues before a neutral third party known as an arbitrator. Similar to a courtroom hearing, the arbitrator will hear both sides and will make a decision about how the dispute will be resolved. An arbitrator’s decision is binding. Many corporations have arbitration provisions in corporate bylaws, so it is important to know whether anything in your corporate bylaws will impact arbitration.

Mediation is also a form of ADR, but it is not binding. While arbitration is more like a judicial process, mediation gives the disputing parties an opportunity to engage in communication and dialogue in order to negotiate a resolution to the dispute. A neutral third party known as a mediator helps to facilitate that dialogue, but unlike an arbitrator, a mediator does not render a decision. When the disputing parties cannot reach an agreement through mediation, they can still take the case to court—nothing in mediation is binding unless the parties decide to enter into a binding agreement.

Litigation to Resolve a Shareholder Dispute

Typically if negotiations through mediation fail, or the parties cannot or will not consider arbitration to resolve a shareholder dispute, the other option is litigation. A court will hear the issues involved in the dispute and will issue a decision about a resolution.

Depending upon the nature of the dispute, it may be necessary to dissolve the corporation. If it is necessary to close the business, your corporation’s bylaws should provide the guidelines for both voluntary and involuntary dissolution.

Contact a Santa Fe Business Litigation Lawyer

If you are involved in a shareholder dispute, a Santa Fe business litigation lawyer can help. Contact Slate Stern Law to learn more about our services.


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