Disagreements between shareholders are more common than many business owners expect. When these disputes escalate, they can cause significant harm to a company’s financial health and operational efficiency. Bringing in a commercial litigation lawyer in Edmonton early in the process can prevent long-term damage and help resolve conflicts strategically and lawfully. Below are some of the most common types of shareholder disputes that may require legal intervention.
Disagreements Over Company Direction
One of the most frequent sources of conflict is a disagreement about the company’s strategic direction. Shareholders may clash over expansion, investment decisions, acquisitions, or leadership appointments. While differing opinions can be productive in some cases, entrenched disagreement can stall decision-making or lead to dysfunction. When the dispute affects company performance or compliance with legal obligations, litigation may be necessary to compel a resolution.
Breach of Shareholder Agreements
Shareholder agreements are designed to provide clear expectations and protections for all parties involved. However, breaches of these agreements, whether intentional or due to misunderstandings, often trigger serious legal issues. Common breaches include the improper transfer of shares, violation of non-compete clauses, or failure to meet financial obligations. A commercial litigation lawyer can assist in enforcing the agreement and holding parties accountable for breaches.
Minority Shareholder Oppression
Minority shareholders may find themselves excluded from decision-making or denied access to financial information, profits, or other rights. This can result in claims of oppression or unfair prejudice. In Alberta, the Business Corporations Act provides legal protections for minority shareholders, but pursuing these protections typically requires professional legal guidance. Legal remedies may include forced buyouts or court-ordered changes in governance.
Misappropriation of Company Funds or Assets
When a shareholder is suspected of using company funds or assets for personal gain, immediate action is often required. This kind of misappropriation not only damages trust among shareholders but can also lead to criminal liability and regulatory sanctions. A commercial litigation lawyer can help conduct an internal investigation, pursue recovery, and ensure regulatory compliance during the dispute resolution process.
Deadlock Between Equal Shareholders
In companies where two shareholders each own 50% of the shares, deadlocks can paralyze decision-making. These situations can be particularly difficult if there is no dispute resolution mechanism in the shareholder agreement. In such cases, litigation may be the only option to resolve the impasse, which could involve court-ordered buyouts or even dissolution of the company.
Valuation Disputes
When a shareholder wants to sell their stake, disagreements often arise over how much the shares are worth. Differing methods of valuation, financial projections, or interpretations of the company’s performance can all contribute to disputes. These conflicts can drag on without legal support, especially if one party feels they are being undervalued or unfairly treated.
Unauthorized Decision-Making
Shareholders can become embroiled in legal disputes when decisions are made without proper consultation or approval. For example, a majority shareholder may implement significant changes—like incurring large debts or restructuring operations—without notifying others. This can lead to claims of misconduct or breach of fiduciary duty, both of which require legal resolution.
Conclusion
Shareholder disputes can be complex, emotionally charged, and damaging to business continuity if not handled properly. Identifying the problem early and consulting with an experienced commercial litigation lawyer is the best way to protect both personal investments and the overall health of the company.
