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The Power of Shareholder Agreements (Part 1): Resolving Business Partner Disputes
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Key Insights
A shareholders agreement can give parties a process when a dispute breaks out. When business owners fall out, the absence of a clear process can make the dispute harder to resolve. Decision-making thresholds, default mechanisms and dispute clauses can give the parties a framework to follow rather than leaving them to argue about what should happen next.
Default and buyout clauses can create real leverage. Events of default and forced buyout clauses can be powerful tools in a co-ownership dispute. They may give one party a trigger to act, create consequences for certain conduct, or provide a pathway to force a resolution. The value of these clauses depends on whether they are understood before they are needed.
Case studies show how the wording works in practice. Shareholders agreements are often signed when everyone is aligned, but they are relied on when the relationship has deteriorated. The episode uses case studies to show how decision-making thresholds, events of default and forced buyout clauses can operate when a shareholder dispute needs to be resolved.
A shareholders agreement is often most valuable when the relationship between business owners starts to break down.
In Part 1 of this Explain That series on shareholders agreements, Jessica Hill and Lauren Gross discuss the mechanisms that can help resolve co-ownership disputes and provide practical triggers if a dispute breaks out.
The episode focuses on key provisions that can give shareholders leverage and a process to follow when conflict arises. Rather than leaving the parties without a clear pathway, a well-prepared shareholders agreement can include mechanisms that help force a resolution.
The discussion covers:
- how shareholders agreements can help resolve business partner disputes;
- decision-making thresholds and how they can affect disputes between shareholders;
- events of default and the consequences they may trigger;
- forced buyout clauses and how they may be used when a dispute breaks out;
- how shareholders agreements can provide leverage when relationships deteriorate;
- practical triggers that parties may be able to rely on; and
- case studies showing how these clauses can be used to force a resolution.
A practical discussion for shareholders, business owners and advisers dealing with co-ownership disputes, business partner disputes or questions about how shareholders agreements operate when conflict arises.
For advice on shareholders agreements, business partner disputes, forced buyout clauses or shareholder dispute strategy, contact Velocity Legal’s Commercial and Disputes teams.
This podcast in no way constitutes legal advice. It is general in nature and is the opinion of the author only. You should seek legal advice tailored to your individual circumstances before acting on anything related to this podcast.
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