In corporate hierarchy, the shareholders are the owners of the corporation. Sometimes problems or issues arise when shareholders disagree, which often lead to disputes.

What are some of the common causes of shareholder disputes?

Shareholders who have the majority votes control the direction of the corporation. They have power over the affairs of the corporation and the other members of the group.

These are some of the common areas of shareholder disputes:

• Issues of new shares – Shareholders often complain that they lose their power over the corporation when new shares are introduced. Shareholders power is proportionate to the number of shares they have. The board of directors, who approves the issuance of new shares to new members, is often in contention with shareholders on this issue.

• Transfers of existing sales – Shareholders usually prevent other shareholders from selling their existing shares to third parties without offering them first to them.

• Procedural disputes – Shareholder’s meetings have strict procedural rules. During disputes, where the status of the meeting and the resolution is in question, dissenters are likely to cause problems.

Other common complaints of shareholders are:

• inadequate notice given to shareholders

• incorrect wording of a resolution

• late or incomplete shareholder proxies

• undue restriction of discussion by the chairman of the meeting

• shareholders voting where they have conflicts of interests

What To Do In A Dispute

The practical thing to do in shareholder disputes is to secure the company assets from other shareholders. This would mean checking the company bank records and if necessary, changed its mandate. One of the contending parties must also secure vital documents to prevent loss or the illegal use of these documents. In most cases, the courts intervene during shareholder disputes.

Resolving the Disputes

There are three ways by which a shareholder dispute may be resolved:

• Buy-outs – This happens when the minority shareholders agree to sell part of their shares to the majority shareholder who is willing to buy it at a fair price. The Articles of Association also allow the aggrieved minority shareholder to offer his share at a specific price.

• Demerger - Another solution is to split the two businesses owned by the two separate shareholders. This is applicable when a company has separate businesses.

• Dissolution – A shareholder can also ask the court to dissolve the company. This procedure involves the liquidation of the company, which is the last resort in resolving shareholder disputes.