5 Potential Outcomes of Shareholder Disputes
Disputes between shareholders can have both short-term and long-term consequences. In the short term, shareholder disputes can disrupt the business’s daily operations and prevent key decisions from being made. In the long term, shareholder disputes can threaten the business’s viability as a going concern—and this can make it critical to find a path forward that preserves the value that the business has built over the years. Learn more from an experienced Miami shareholder dispute attorney at Edelboim Lieberman:
What Are the Options for Resolving a Shareholder Dispute in Florida?
Broadly speaking, there are five main options for resolving a shareholder dispute in Florida. However, the options available in any particular case will depend heavily on the specific circumstances. When facing a shareholder dispute, assessing the options that are available requires careful consideration of key factors such as:
- The nature of the dispute
- The terms of the shareholder agreement
- The total number of shareholders (including any not involved in the dispute)
- Each shareholder’s personal financial capacity
- The business’s value and long-term viability
These factors, among others, will inform the options that are on the table—and this, in turn, will inform each shareholder’s decision-making regarding their dispute. With this in mind, the main options that are generally available in these scenarios include:
1. Negotiating a Buyout
One possibility is to negotiate a buyout. If one or more shareholders are willing to purchase the other shareholder’s ownership interest (or the other shareholders’ ownership interests), this can enable a clean split that otherwise keeps the business intact.
Of course, the shareholders will need to agree on who is staying and who is going, and on a price. But assuming they can come to terms on these issues, they can execute a buyout and move on.
2. Dividing the Company
Another possibility is to divide the company, with one shareholder (or group of shareholders) continuing to own and operate one portion of the business while another shareholder (or group of shareholders) continues to own and operate another. While this won’t be a viable option in all cases, it can be a solution when a company has multiple distinct lines of business or multiple facilities.
3. Selling the Company
A third option is to sell the company in its entirety. This will also require the shareholders to agree on a price (subject to the terms of their shareholder agreement); but, if successful, it will allow all of the company’s existing shareholders to exit and go their separate ways. For those who plan to start a new business after the sale, it will be important to ensure that they are not subject to any unduly burdensome competitive restrictions.
4. Winding Down the Business
A fourth option is to wind down the business. If none of the shareholders are interested in continuing to operate the business, and selling to a third party is not a viable option, then winding down may be the only practical solution. Here too, however, the shareholders will need to agree on a path forward—from how and when to wind down the business to how to distribute its remaining assets after satisfying its outstanding financial obligations.
5. Finding an Amicable Path Forward
Even in highly contentious scenarios, finding an amicable path forward may be an option. By working with an attorney experienced in settling shareholder disputes, the shareholders may find a way to reach a settlement that also provides a solid foundation for the future. In some cases, mediation can be an effective tool as well. If the shareholders in a dispute share a common interest in keeping their business relationship intact, this alone can be a powerful motivator for all parties to come to the negotiating table.
Which Option Should You Pursue?
So, which option should you pursue? Answering this question will require a careful assessment of the situation at hand, your personal circumstances and priorities, and the circumstances and priorities of each other’s shareholders involved in the dispute. With this in mind, in order to answer this question, it will first be necessary to answer questions such as:
- Do you want to remain in the business (with or without your current business partners)?
- Do your business partners want to remain in the business (with or without you)?
- Do you have the capital to execute a buyout? Do your business partners?
- Is splitting the company into two separate businesses a viable option?
- What does the shareholder agreement say about buyouts, winding down the business, or selling the company in its entirety?
These are just examples. To make informed decisions about your next steps, you first need to have all relevant information. An experienced Miami shareholder dispute attorney can help ensure you consider all relevant circumstances and contingencies so you can feel confident in your decision-making.
What If Shareholders Can’t Agree On What to Do?
All of the options discussed above rely on disputing shareholders being able to agree on what to do. So, what if they can’t?
If disputing shareholders can’t agree on a path forward, they will need to pursue dispute resolution proceedings. Whether this involves pursuing mediation, arbitration, or litigation will depend on the terms of the company’s shareholder agreement. Many shareholder agreements include mandatory alternative dispute resolution (ADR) provisions that require mediation or arbitration (or both). In any case, if the shareholders can’t agree, they will ultimately need to rely on an arbitration panel or a judge to decide for them.
Speak with a Miami Shareholder Dispute Attorney at Edelboim Lieberman
If you are facing a shareholder dispute in South Florida, our attorneys can help you make informed and strategic decisions about your next steps. To speak with an experienced Miami shareholder dispute attorney at our firm in confidence, call us at 305-768-9909 or request a free consultation online today.
