Business is all about relationships. And, like all relationships, business relationships can be complicated. This is especially true when disagreements arise between partners who own a business together. The same goes for shareholders. Since they own shares or stocks in private or public corporations, they have a financial interest in that corporation or company. So if shareholders disagree with owners, disputes may arise.
There is a full range of legal issues involving shareholders. A Florida Shareholder and Disputes Lawyer can help shareholders and partners resolve issues like:
- Routine shareholder-related legal issues
- Reviewing contracts and agreements
- Shareholder litigation, if necessary
- Breach of fiduciary duty
- Embezzlement of funds
- Inappropriate executive compensation
- Improper contact or communication with a competing firm
- Issues related to sudden departures
- Reselling shares
- Negligent Management
- Ownership or Management disagreements
- Violations of partnership agreements, operating agreements, or bylaws
Conflicts between partners are inevitable. However, when a dispute threatens the viability of the Partnership or company, it is time to take the necessary steps to resolve the issue. Sometimes, this is not possible without a third party. Moreover, shareholder disputes can get intense and bitter, so it’s helpful to have solid legal representation on your side.
Read on to learn about different types of partner and shareholder dispute claims.
What Is a Shareholder or Partner Dispute?
Shareholder disputes are common and often come with high stakes. Shareholder disputes can take form in different ways; it can be a disagreement among shareholders or between shareholders and the company owners. Perhaps shareholders disagree with a company’s management style of decision-making. Or there may have been an instance of fraud or illegal conduct. Shareholder disputes can vary greatly.
Business partnership disputes often originate from the same few sources. They may include, but are not limited to:
- Workload imbalance between the partners.
- Disagreement on resource allocation and distribution.
- Disagreements about business management.
- Differing visions for the company.
- Real estate disputes
- One partner accuses the other of misconduct.
Once partner disagreements start, they almost always escalate. As a result, the partners may lose sight of how their dispute began and thus making it more challenging to resolve the issue.
The rights and responsibilities of a shareholder will vary depending on the governing agreement. Under Florida Statute 607.1602, shareholder’s rights include:
- Inspection of corporate records
- The right to sue for wrongful acts
- Derivative action
- Voting power
- The right to transfer ownership
The constitutional documents should outline the rights and responsibilities of a shareholder (e.g., articles of incorporation, any shareholders agreements). Agreements often provide rights that can inform how a shareholder chooses to resolve their dispute.
Likewise, all parties entering into a partnership should have a written Business Partnership Agreement. The agreement should clearly state all partner’s rights in a partnership. In addition, the agreement should control the rights and duties of the partners unless in conflict with partnership laws, such as the Florida Revised Uniform Partnership Act.
Common Shareholder and Partner Dispute Claims in Florida
Breach of Fiduciary Duty
A fiduciary duty is the highest standard of care under US law. Many types of fiduciary relationships can arise in a business context; the most common ones are between:
- Agents and principal
- Between partners
- and board of directors and shareholders
Breach of fiduciary duty happens when someone who has a responsibility to act in the interests of another person fails to do so. For example, corporate officers and managers owe a fiduciary duty to their shareholders in a corporation. Likewise, Partners have a fiduciary duty to act in the interests of the other partners and the company.
A controlling majority shareholder could also owe a fiduciary duty to their minority shareholders. When someone breaches their fiduciary duty, the offending party could be held liable for any damages incurred by the shareholders.
Examples of breach of fiduciary duty include:
- Exposing a company to liability through negligence
- Concealing important information from partners
- Preventing shareholders from exercising their right to vote
- Wrongful action intended to force out minority shareholders
- Failing to disclose conflict of interest
Corporate Officer Self-Dealing
Self-dealing is precisely what it sounds like. Under Florida law, self-dealing occurs when an inside officer or director takes advantage of their privileged position. They may attempt to advance their own self-interest and disregard or even harm the interests of the corporation or Partnership. Corporate officer self-dealing can result in financial losses to other shareholders.
Shareholder Claims Against Directors, Officers, or Managers
Every corporate entity has a board of directors chosen by the shareholders. The board makes decisions on behalf of the company. In smaller corporations, the board is often made up of majority shareholders. In larger corporations, however, board members often include professionals with different skills to help manage the company.
Regardless of how the board is composed, board members have a fiduciary duty to act in the interest of shareholders.
It is common to see branches that occur in the partnership context also occur with board members.
Shareholder Derivative Lawsuits
A shareholder derivative suit is a lawsuit brought by a shareholder, or group of shareholders, on behalf of the corporation against the corporation’s directors, officers, or other third parties who breach their duties. Shareholder derivative lawsuits are notoriously complex and challenging.
While a shareholder brings a derivative lawsuit on behalf of the corporation, they can’t do it whenever they please. However, a shareholder can bring a derivative lawsuit with minimal circumstances.
In Florida, shareholders may bring a derivative claim only if the corporation has a valid legal cause for action but refuses to pursue legal. The most common scenario is when a corporate officer or director has a conflict of interest in pursuing the claim.
Shareholder Oppression Claims
“Shareholder oppression” is a scenario in which a majority shareholder intentionally acts in a way that unfairly damages the interests of the minority shareholder. For non-public companies and partnerships, this can be a significant issue.
Since minority shareholders may not have a clear path to sell their shares to protest the value, they can easily be mistreated by majority shareholders.
A deadlock dispute happens when there is no clear resolution. Smaller businesses that have a limited number of shareholders often encounter this problem. An example of a deadlock would be two business partners split on an important decision. Or if an article of incorporation requires but cannot reach a unanimous vote. Deadlock disputes often cause damage to business and business relationships.
Minority Shareholder Rights
Florida law gives minority shareholders several different and fundamental legal rights. Minority shareholder rights fall into the following categories:
- Voting rights – All minority shareholders have a right to vote. They can vote on who controls the daily operations of a company. Minority shareholders in a corporation have the right to vote on the board of directors, and in LLCs, they may have the right to vote for managers.
- Inspection rights – this is an extremely valuable right for shareholders. Florida law(Section 607.1602) grants minority shareholders inspection rights. That means they have the right to review all corporate documents and records.
- Distribution rights – minority shareholders have the right to receive their fair share of profits in full.
Why Do I Need A Floria Partner and Shareholder Dispute Lawyer?
Business conflicts involving partners or shareholders can escalate quickly and get out of hand. Our attorneys understand that important business matters lead to disputes, often with heightened personal feelings intertwined.
That’s why it’s crucial to find experienced lawyers who provide the highest level of professionalism so that all parties can focus on the key issues. Your attorney can give legal advice on unique solutions that best suit your circumstances. Furthermore, your lawyer can present and advise legal remedies for partnership disputes. For example:
- Expelling the offending partner from the company
- Pursuing the liable party for a Breach in the Partnership
- Seeking liquidated damages via monetary damages
- negotiating a settlement between the parties
Contact Our Shareholder and Partner Dispute Lawyers Today
Business works best when there are clear rules that govern partner and shareholder conduct.
With diligent preparation, your business can successfully overcome sudden contingencies or issues. In addition, a small investment of time and effort can help shareholders and partners prevent major problems.
Rivalries between business partners can get complex and sometimes turn sour. We minimize the time and resources that go into disputes and work towards a resolution through consensus. However, we are also prepared and equipped to litigate if necessary.
We represent shareholders throughout Florida and have extensive experience handling all aspects of shareholder disputes.
Call us today to learn more about what we can do to help you and schedule a fully confidential initial consultation.