Business Divorce & Shareholder Relations
Business man and business woman shaking hands

Business disputes apply to the negotiation or legal proceedings meant to end the business relationship between at least 2 partners to dissolve their privately held entity. It is the splitting up of a jointly owned business as a result of certain occurrences to wit: death of a key partner; principal departs with the company’s confidential information; deadlock; disputes; retirement of a principal member; sickness of a principal member; criminal activity or liability, operation of law and any such occurrences that can lead to a business divorce. At the occurrence of any of the above, a company may be left with no other option than to go for a business divorce.

Shareholder Relations

The relationship between shareholders and directors is very crucial to every company. If this relationship is not adequately managed, it can affect even the day to day running of the business. The directors owe certain obligations to the shareholders and the shareholders owe some obligations to the directors in return.

The relationship between these parties is outlined in the corporate charter shareholder agreements and other shareholder provisions. The directors must protect the interest of the shareholders by adequately carrying out their fiduciary duties, duty of care, duty of loyalty and duty of obedience. The shareholders must see transparency at the Annual General Meeting. A more open relationship is expected between the shareholders and the directors.

To bridge the gap between the directors and shareholders, businesses create the Investor Relations Department (IR). This department is saddled with the responsibility of mediating between the directors and the shareholders to wit: to provide information on the company’s past performance, future strategies for growth and so on; transparency of corporate governance; and to work closely with other units of the company. If the relationship between the board of directors and shareholders is not handled with care, it could lead to business divorce.

Things To Consider During A Business Dispute

1. The Value of the Business

It is very important at this point to ascertain the value of the business, ranging from the company assets, the liability of the business, the intellectual property and possibly, the goodwill of the company. To know the actual value of the company’s assets, less liability, there would be a need to engage experts to value them and tender a report. It is when you know the value of the business that you will know how to split it.

2. Preferred Method of Dissolution

Whichever type of dissolution you are going for, it can be achieved via litigation or out of court settlement. Each of the methods has its advantages and disadvantages. However, out-of-court settlement is generally known for its flexibility, speed, engagement of experts as arbitrators or mediators rather than juries, simplicity and so on. As a result of these enormous advantages of out-of-court settlement, lawyers and disputing parties often favor it over litigation, although the circumstances of the case determines the method to approach dissolution.

3. What to Split

Some businesses go for a full separation and dissolution, whereas others continue a revised relationship and many more. It is important to determine if the dispute is a full separation & dissolution, or continuing a revised business relationship on which they can base their claims in support of the revised business relationship. Also, it is a tedious task to determine who goes with what at the end of the separation.  However, the method of forming the business and the company’s legal documents play significant roles in this aspect. For instance, if a partner brought in the assets and put everything in place, whereas another sees to the operation of the business, at the time of separation, each can be made to go home with what he brought, though the partner in operations may claim compensation. It is neither here nor there, the bulk of facts placed on the table determine what you will go with after the dissolution, hence the need to brief a good business dispute firm for your case.

4. Time

It is important to consider time when making preparations for a business dispute. This is important because it goes a long way to determine the method to explore for the dissolution. Time is of the essence when lack of transparency is one of the reasons for the business separation. Time is also of essence when the separation is to continue a revised business.

5. Cost

Business dispute litigation is a very cost intensive one. It is important to consider the cost implications of a business dispute when embarking on one.

Business Disputes Law Firm

A good business dispute law firm has a lot to do when briefed with such matters. The firm is expected to review the company’s governance documents, including bye-laws, stockholder agreement, Limited Liability Agreement and partnership Agreement. As a very complex litigation, the law firm is expected to have a mix of the following skills and knowledge of the relevant legal issues such as: Internet Affairs Doctrine; Duties of Care and Loyalty owned by directors and officers; Direct versus derivative actions; Indemnification; Corporate Waste Doctrine; Limitations of Liability in Article of Incorporation; D & O Insurance; Buy and Sell Agreements; Piercing the Corporate Veil and so on.

The Barnwell Law Group Handles Business Disputes

The legal attorneys at Barnwell Law Group have decades of experience in business disputes. The department in charge of business dispute in Barnwell Law Group has worked on affirmative and defensive causes on business dispute litigations. We have an excellent knowledge of the relevant legal issues that have to do with business disputes and separations. We know how to get what our client wants and we achieve that through our negotiation skills.

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