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The Power of Shareholder Agreements (Part 2): Resolving Business Partner Disputes Without a Shareholders Agreement
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Key Insights
Without a shareholders agreement, the parties may need to negotiate when they are least able to agree. The difficulty is not only the legal position. It is the timing. If there is no agreement in place, shareholders may have to negotiate a resolution after the relationship has already broken down. That can make even practical issues harder to resolve.
The absence of agreed mechanisms can increase cost and uncertainty. A shareholders agreement can set out how disputes are handled before conflict arises. Without one, there may be no clear process, trigger or pathway to resolution. That uncertainty can increase the risk of a prolonged and costly dispute.
Case studies show why formal agreements matter. The episode uses case studies to illustrate the difference a shareholders agreement can make. When a formal agreement exists, the parties may have clauses they can rely on. Without one, the dispute may depend on negotiating an agreed outcome with a business partner who no longer wants to cooperate.
Resolving a business partner dispute is much harder when there is no shareholders agreement to rely on.
In Part 2 of this Explain That series on shareholders agreements, Jessica Hill and Lauren Gross explore what can happen when shareholders are already in dispute but have no formal agreement setting out the process for resolution.
The episode focuses on the practical challenges of trying to negotiate terms after the relationship has soured. Without agreed mechanisms in place, business owners may be left to negotiate from scratch, often in circumstances where trust has broken down and each party may have a different view of how the dispute should be resolved.
The discussion covers:
- the challenges of resolving business partner disputes without a shareholders agreement;
- why negotiating terms after a dispute arises can be difficult;
- how the absence of agreed mechanisms can increase uncertainty;
- the potential for prolonged and costly legal battles;
- why formal agreements can help avoid having to negotiate a resolution after the relationship has deteriorated;
- case studies showing how disputes can become harder to resolve without a clear agreement; and
- practical lessons for business owners and advisers dealing with co-ownership disputes.
A practical discussion for shareholders, business owners and advisers dealing with co-ownership disputes, business partner disagreements or the consequences of not having a shareholders agreement in place.
For advice on shareholders agreements, business partner disputes, co-ownership arrangements 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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