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How common ownership disputes can affect a business

On Behalf of | May 5, 2024 | Uncategorized

Securing an ownership interest in a business is a major investment. Some people buy into established companies as shareholders and then help play a role in governing a corporate organization. They attend meetings, vote on certain key organizational decisions and receive dividends when the company is successful.

Other people play a more active role in the creation and management of a company by becoming a business partner. Perhaps they are a financial partner, or maybe they helped develop the company from the ground up with a friend or former co-worker. Both shareholders and business partners may find themselves embroiled in disputes that can damage the organization. Recognizing how different types of disputes can affect a business could inspire those involved to seek an effective solution.

How shareholder disputes cause challenges

Shareholder disputes might involve a freeze out, which occurs when one party with a majority steak or a group of shareholders tries to push others out of the organization. Freeze-outs often occur with the intent of coercing a shareholder into giving up their interest in the company, possibly for less than they deserve for their shares.

Disputes could also arise when shareholders clash with leadership about poor financial reports or conduct issues. A shareholder conflict can lead to numerous organizational challenges, including expenses triggered by shareholder lawsuits. If left unaddressed, shareholder disputes can do real damage to an organization’s operations and to its reputation with investors.

How partnership disputes harm companies

Partnership disputes can have more immediate and damaging effects on companies than shareholder conflicts. Often, shareholders only meet occasionally and play minimal role in the daily operations of a business. Partners who actively participate in business operations might find that their dispute affects the company culture quickly.

Partnership disputes can easily turn personal because of how frequently people see each other in a partnership situation. Hostility between partners can create a very negative environment for the people involved and other workers who interact with them. Embezzlement, inappropriate solicitations and other misconduct by business partners can affect an organization’s ability to compete and might lead to its dissolution eventually.

Ownership disputes can have operational and financial implications. Those involved in such disputes are often eager to resolve them quickly and with minimal impact on the organization. Alternative dispute resolution or a partner buyout are both ways to resolve an ownership dispute in a relatively amicable manner. If pursuing an amicable resolution is unsuccessful or unrealistic, then corporate litigation may be necessary. Knowing when to take legal action over issues related to business ownership can help someone protect their investment and the organization in which they have invested.