more than 40 years of legal experience
302, 15252 – 32nd Avenue | Surrey, British Columbia V3Z 0R7

Shareholder and Partnership Dispute Lawyer

Businesses are built on open communication and trust between business partners, and when issues arise, they can lead to serious legal concerns. When an amicable working relationship becomes anything but, it’s time to seek skilled legal guidance. The best path forward is with swift, decisive action, and an experienced Vancouver corporate dispute lawyer has the experience and legal insight to skillfully guide the way. 

The Importance of Legal Expertise in Shareholder and Partnership Disputes

When the structure of your business or your legal rights to the business are on the line, there is a lot at stake. Shareholder and partnership disputes are complex, and without skilled legal representation, your ability to protect your ownership rights will be far more challenging. Having legal counsel in your corner can provide you with the peace of mind that comes from knowing your rights are well represented, and your best interests are well supported. 

What to Expect from This Article

This article serves as a guide for the legal process ahead. From the shareholder agreement to contract review, advisory services, mediation and arbitration, court proceedings – and beyond – knowing what to expect can help you better prepare for what’s to come. While your situation is unique to the specifics involved, there are important basics that apply across businesses, and this guide can serve as an excellent resource moving forward. 

The Role of a Shareholder and Partnership Dispute Lawyer

While you and your fellow partners or shareholders may have started out in perfect agreement regarding your overall business goals, disagreements, and objections regarding direction are not uncommon, and the success of your business – and your stake in it – can hang in the balance. 

Shareholder and partnership dispute lawyers have the legal insight, experience, and expertise to help those in business partnerships draft clear organizational documents that help avoid disputes in the first place. If an issue does arise, however, legal representation can clarify your obligations as well as your rights within the parameters of the organizational documents. 

Often, resolutions can be navigated through open negotiations. And barring that, alternative dispute resolution options like mediation or arbitration can be highly effective.

Sometimes, terminating the business relationship is the only option, and when that’s the case, working closely with a dedicated shareholder and partnership dispute lawyer can make a profound difference in the outcome of your case. 

Legal Representation

In the face of shareholder and partnership disputes, having trusted legal representation is key.

Court Proceedings

When negotiations or an alternative dispute resolution fails to resolve the dispute you’re facing, litigation may be necessary. Shareholders have important legal remedies available when the conduct at hand is determined not to fairly uphold their interests – or to be otherwise prejudicial – and the court has considerable discretion for resolving oppressive conduct.   

The Partnership Act governs the rights and obligations of business partners outside of formal and legally binding partnership agreements. This act is designed to ensure fair, good-faith dealings between partners, and when a specific dispute isn’t addressed by the partnership agreement, the Partnership Act prevails. 

Mediation and Arbitration

Mediation allows business partners and their respective partnership dispute lawyers to come together and address the concerns they face with a professional mediator. This can help to define the issue more clearly, which can lead to more productive problem-solving. Mediators, however, do not make decisions on behalf of the involved parties, and the matter in question can only be resolved if the parties reach a mutually acceptable settlement. 

Mediation affords a less formal atmosphere for opposing parties to resolve organizational matters with guidance and legal support in relation to their business interests – minus the stress of litigation. Mediation often comes down to determining where each party’s business interests intersect, and the process offers a good deal more privacy than resolving the matter in court can. 

The goal of mediation is establishing common interests and exploring them in relation to compromises that serve the greater good. 

Arbitration, on the other hand, is a mechanism for resolving disputes outside of court that is intended to be impartial, relatively speedy, and binding. When partners enter arbitration, they agree to the binding nature of the arbitrator’s – or arbitrators’ – decisions. Arbitrators are generally chosen by the involved parties, and the process includes:

  • Receiving each side’s submissions
  • Conducting a fair, impartial hearing in accordance with the law
  • Making decisions that are legally enforceable 

Both sides must agree to arbitration, or it must be stipulated in the shareholder agreement. Both mediation and arbitration are generally less costly, less time-consuming, and more private than litigation. 

Advisory Services

The advisory services provided by accomplished shareholder and partnership dispute lawyers can prove invaluable in relation to the outcome of your case. Shareholder disputes can arise for any number of reasons, but some of the most common include the following:

  • A violation of the shareholder agreement that’s in place
  • The termination of a business relationship
  • The oppression of minority shareholders
  • The forced buyout of shares
  • Disputes related to share price and valuation
  • Financial fraud
  • The breach of fiduciary duty
  • Shareholder disagreements
  • Dissolution of the business

Any one of these can lead to considerable conflict, and the advisory services of a focused shareholder dispute lawyer can help you protect your business interests.

Legal Consultation

The goal is settling business disputes as quickly and amicably as possible – while protecting your business interests – and legal consultation can make all the difference. The longer the dispute drags on, the more damaging it can be to the business itself, which can – in turn – impact your own bottom line. 

While your rights as a shareholder will be specific to the involved circumstances, the basics generally include:

  • The right to vote at shareholder meetings
  • The right to receive the dividends you’re owed
  • The right to your fair percentage of remaining assets following the corporation’s dissolution or winding up

If you have concerns about protecting your business interests, legal consultation is advised.  

Contract Review

A solid shareholder agreement guides the actions of the company’s directors and officers – in support of the shareholders’ fair dividends. Because there are typically multiple interests involved, disputes and other issues are not uncommon. Often, the impetus behind shareholder and partner disputes relates to which business opportunities and strategic goals to pursue. As such, early contract review can play a critical role.

Why Shareholder Agreements Are Crucial

Shareholder agreements guide how future disputes will be resolved, which makes putting in the time, effort, and expense it requires to establish a well-considered agreement an excellent value. Corporate dispute lawyers have the knowledge and business foresight to help draft agreements that take a proactive approach to common corporate concerns. 

Any stalling in relation to business proceedings can be costly, and the right shareholder agreement can help you avoid such challenges. If you’ve already experienced a snag and are facing a shareholder or partnership disagreement, the sooner the matter is resolved, the better – but protecting your business interests is too important to leave the concern to chance. Consult with a savvy shareholder and partnership dispute lawyer today.

The Basics of a Shareholder Agreement

Shareholder agreements are designed to help ensure the smooth operation of businesses while protecting the rights of the parties involved. An important part of this is preventing disputes, which can help pre-empt potential problems that have the capacity to do serious damage. 

Preventing Disputes

Disputes often arise in relation to the direction a business is taking, operational matters, and shareholder rights in general. One of the best strategies for preventing disputes in the first place is having a sound shareholder agreement in place. A comprehensive agreement establishes which practices will be employed and lays out the dispute process, which takes the guesswork out of a wide range of potential concerns and can help to ensure that everyone remains compliant. 

Even relatively minor disputes can lead to serious business consequences, which makes having an effective agreement in place well worth the effort. 

Clauses to Include

While no two shareholder agreements are exactly alike, it’s prudent to include clauses that address all the following:

  • The terms that guide the transfer of shares, as well as restrictions on the transfer of shares
  • The decision-making authority of shareholders, partners, and directors
  • The dispute resolution process that will be used in the event of a problem
  • Clauses that address management and governance
  • A clause that addresses valuation
  • Noncompete, nondisclosure, and non-solicitation clauses

Handling Deadlocks

If you’ve gone through the steps of negotiation and mediation but are no closer to resolving the dispute at hand – with the necessary percentage of votes – you’ve reached a deadlock, and it’s important to consider your options, including:

  • Buying back the shares of the shareholder who has created the impasse
  • Bringing in an external swing vote – as addressed in the shareholder agreement
  • Entering arbitration
  • Filing a court action
  • Winding up or liquidating the business

The Anatomy of Shareholder Disputes

Shareholder disputes generally require either derivative or oppression actions, and the distinction can be complicated.

Derivative Actions

In a derivative action, a shareholder or another party files a lawsuit on behalf of the corporation – in support of its best interests. As such, the shareholder is said to stand in the shoes of the company. Before the court will allow the action, all the following must apply:

  • The application was made in good faith.
  • The directors are not willing to take the complainant’s proposed action.
  • The relief sought is in the corporation’s interest.

Oppression Remedy

In an oppression application, the complainant – often a shareholder – asks for relief from a specific form of harm that they are experiencing but that others may not be. The Government of Canada relays that if the court determines that the corporation or its directors engaged in an act that is oppressive or unfairly prejudicial to or that unfairly disregards the interests of any security holder, creditor, director or officer of the corporation, it can rectify the matter.

In so doing, it can create interim or final orders, amend corporate documents, wind up the corporation, order a trial to address any issue, and beyond.

Common Causes

One of the most common causes of corporate conflict is the failure to have a precisely worded shareholder agreement in place. Without a robust agreement, financial mismanagement becomes far more likely, and conflicts of interest are more difficult to avoid. 

Financial Mismanagement

Shareholder disputes involving financial mismanagement can relate to any of the following:

  • Misappropriation or embezzlement of company funds
  • Mismanagement of company assets
  • An executive, director, or shareholder not living up to their fiduciary duty, which includes putting the business’s best interests above their own
  • A breach of shareholder financial agreements

Conflict of Interest

Issues caused by conflict of interests relate to a shareholder or officer who acts in accordance with their personal interests rather than the corporation’s. Another concern is when a shareholder’s interests compete with the company’s, which sets the stage for issues to arise. This is especially true when a business is closely held, and shareholders are directly involved in its daily operations.

Types of Shareholder Disputes

Shareholder disputes are often based on claims of mismanagement, but they can take various forms.

Majority vs. Minority Shareholders

Minority shareholders generally don’t have any decision-making power in relation to day-to-day operations because the majority shareholders can outvote them. When parties share ownership of a business, majority shareholders, which can be one shareholder or a group of shareholders, are in a position of control regarding the company’s activities. This control, however, is subject to the terms in the shareholder agreement and to restrictions imposed by law. Further, some decisions require more than a 51 percent majority – and can require unanimity – and the sale of the entire business is a common example. 

Minority shareholders have to face the fact that majority shareholders aren’t required to gain their approval regarding operational decisions. They are, however, required to treat minority shareholders fairly and to comply with the terms of the shareholder agreement. Majority shareholders, in other words, cannot oppress minority shareholders. 

Involuntary Dissolution

Involuntary dissolution refers to dissolution by the state, and it can be predicated on a serious dispute between shareholders regarding dissolution, on bankruptcy, on failure to file the necessary reports with the state, on failure to pay taxes, and on other serious infractions. Once a business has lost standing with the state, the shareholders lose their decision-making authority, and the state can require dissolution. In some cases, however, it is possible to file for reinstatement. 

Partnership Disputes and How to Navigate Them

If you’re facing a partnership dispute, you may think addressing the matter aggressively right out of the gate is the best approach, but that’s rarely the case. The fact is that – unless financial shenanigans are going on – shareholders typically want the same thing, which is maximizing the business’s growth and earning potential. 

As such, the best approach when it comes to navigating partnership disputes includes the following basic steps:

  • Bringing your concerns to the table and engaging in an open discussion 
  • Identifying the issues that need to be resolved 
  • Engaging in negotiations that allow you to explore your best options
  • Considering alternative dispute resolutions, such as mediation or arbitration
  • Proceeding to court when it’s called for

The sooner you engage a formidable shareholder and partnership dispute lawyer, the better protected your interests will be.

Common Types of Partnership Disputes

The underlying issue of the partnership dispute you’re experiencing can take many forms, but many focus on basic concerns, such as compensation disputes and operational disagreements. 

Compensation Disputes

Shareholder disputes are often financially motivated, and one such concern is unfair compensation. For example, if an officer is deemed to receive unfair pay, it directly affects the value of the other shareholders’ ownership.

Operational Disagreements

How a business is operated plays a pivotal role in how profitable it is. When there are serious disagreements concerning basic operations, it can lead to a deep division that is difficult to bridge.

Resolving Partnership Disputes

If you’re facing a partnership dispute, finding a resolution that causes as little disruption as possible is generally the goal. Even a minor skirmish can lead to serious financial consequences and can make getting back to smooth operations that support maximum profits that much more challenging. Remedies fall into two basic categories, which include legal remedies and out-of-court settlements.

Legal Remedies

Legal remedies are those ordered by the court. If you’re unable to resolve your dispute outside of court, you’ll need the court’s intervention on the matter. The court’s word will definitely resolve the concern, and this decision will guide what comes next. 

Out-of-Court Settlements

Many shareholder and partnership disputes are resolved outside of a courtroom. This can mean focused negotiations that involve each party and their seasoned corporate dispute lawyer, mediation, or arbitration. While arbitration is legally binding, the involved parties must agree to the process ahead of time. 

Intellectual Property Rights in Disputes

All too often, shareholder agreements fail to address the important matter of intellectual property rights. 

Important considerations regarding intellectual property rights include:

  • Have a confidentiality agreement – or nondisclosure agreement – in place when discussing company plans, which can lead to the inadvertent sharing of confidential information.
  • Intellectual property that is created by a shareholder or consultant isn’t automatically owned by the company – it must be assigned.
  • Creating a separate holding company for intellectual property can help mitigate related risks. 
  • In order to secure exclusive rights to a name or logo, it must be trademarked. 
  • Remember that those contracts you sign can have lasting consequences, which makes proceeding with care advised. 

Taking intellectual property concerns seriously from the outset is essential, and for that, you need a reputable Vancouver corporate dispute lawyer with extensive experience successfully handling intellectual property concerns.  

The Risk of IPR Theft

Intellectual property rights (IPR) are exceptionally valuable to your business, and they are the backbone of many thriving business enterprises. As such, protecting your IPR is of the utmost importance. Failure to do so can have dire consequences. Intellectual property refers to creations rather than to physical goods, but theft of intellectual property can be even more serious because it dilutes the entire line of products rather than simply diminishing your supplies.

When someone or some entity steals an invention, idea, or creative expression from your business, it is intellectual property theft, and the charge applies to all the following:

  • Patents
  • Inventions
  • Names, logos, and symbols
  • Client lists
  • Copyrights
  • Trademarks
  • Trade secrets

The risk of intellectual property theft is all too real, and skilled legal counsel can help. 

Legal Actions to Protect IPR

If another entity is using your intellectual property outside the boundaries of the law, it’s time to take action. The first step is reminding the at-fault party that intellectual property theft is a crime and requesting that they stop. A well-penned letter from your lawyer may be all that it takes. If the infringing party fails to respond with appropriate action, it’s time to consider additional options. 

Alternative Dispute Resolution Methods

Alternative dispute resolution offers a means of resolving legal concerns, such as IPR theft, outside of court. The basic options include mediation and arbitration.

Mediation

At mediation, each party – along with their respective lawyer – enters into focused negotiations that are guided by a professional mediator. Mediation offers the opportunity to explore a wide range of options in a less formal atmosphere than court. Further, the matter is private, which many business entities consider beneficial, and unless all sides come to a mutually acceptable resolution that they are all willing to sign off on, it is not legally binding. 

Arbitration

Arbitration falls somewhere between mediation and court on the scale of alternative dispute resolution methods. In arbitration, an arbitrator hears each side’s arguments and hands down legally binding decisions. Prior to engaging in arbitration, however, all involved parties must agree to do so.

Private Negotiations

As mentioned, notifying the offending party that you don’t appreciate them pilfering your intellectual property and reminding them that it’s against the law may be all it takes to successfully make your point. If the other side fails to see the error or its ways, however, private negotiations can help resolve the issue before things become more complicated. Having trusted legal guidance is always the best approach. 

When to Go to Court

If you have attempted to resolve the dispute out of court but have exhausted your options, it may be time to go to court. Sometimes, the process of filing – in and of itself – can be highly motivating, and you may find yourself back at the negotiation table. If your case is headed to trial, however, there is a considerable amount of work to be done. 

Assessing the Situation

To begin, you’ll need to assess the situation at hand and respond accordingly. For example, the path forward if you have a compensation dispute is somewhat different than if you have an operational disagreement. 

Unfair compensation claims assert that one or more officers compensated themselves unfairly, which decreased the company’s overall value and your share in it. If your dispute, however, addresses an operational agreement, it hinges on how the business itself is operated, which determines profitability.

There is also the matter of whether the case is a derivative or oppression action. In a derivative action, you represent the corporation’s best interests, which also represent your own, and in an oppression action, you seek compensation for the harm you’ve suffered as a result of one or more officers’ actions. 

Preparing for Court

Preparing for your court date requires considerable focus, skill, and drive, and proceeding without a knowledgeable corporate dispute lawyer leaves you vulnerable to a less-than-optimal outcome. Shareholder litigation is challenging, and positioning yourself for success requires legal savvy.   

Documentation

Regardless of the kind of case you file, it’s important to gather documentation like the following:

  • All relevant communications with the other parties involved
  • Any agreements reached between the involved parties, including shareholder agreements
  • All corporate documents, including bylaws, minutes from shareholder meetings, articles of incorporation, and shareholder and director resolutions
  • Proof of share ownership, such as certificates
  • The company’s financial statements, including asset and liability listings

Legal Strategy

The legal strategy will play an elemental role in how your case proceeds, and the right strategy for you will depend on the unique circumstances involved. Proceed with caution and focused legal guidance.   

How a Lawyer Can Assist during a Dispute

A shareholder dispute can quickly become heated, and without a lawyer’s trained perspective, it’s easy to lose your way. Your highly experienced shareholder dispute lawyer will help you gain perspective, strategize a solid legal path forward, and protect your rights – while skilfully pursuing a beneficial resolution. 

Expertise and Experience

The right lawyer for you will bring expertise and experience to your case, which better positions you for an outcome that restores your rights as a shareholder. 

Risk Assessment

Having legal representation helps to ensure that you fully understand the risk involved and proceed accordingly. 

Negotiation and Litigation Support

Very often, shareholder disputes are resolved through careful negotiations, which successful shareholder dispute lawyers have an impressive array of experience deftly handling. When negotiations break down, however, litigation support is critical, and your dispute lawyer will be well prepared to step in. 

Conclusion

Effectively resolving disputes among shareholders, partners, and officers requires effective legal representation, and the capable shareholder dispute lawyers at Doran Law – proudly serving Metro Vancouver in British Columbia – have the experience and imposing track record to help. To learn more, reach out and contact or call us at 604-542-9455 today. 

Summary of Key Points

The key points regarding shareholder disputes include:

  • A well-run corporation protects your financial rights.
  • Your financial rights matter.
  • Seasoned legal representation is the surest means of protecting your rights.

Next Steps for Those Facing Shareholder or Partnership Disputes

Once you recognize that you have an actual or a potential shareholder dispute on your hands, it’s time to consult with a dedicated shareholder dispute lawyer. Protecting your interests from the outset is always to your advantage. 

Legal Consultation Services

We offer an initial consultation at no charge to you that’s designed. to help you better understand the process and to allow us the opportunity to sketch out the best steps forward.

FAQs

How much does it cost to hire a dispute lawyer?

The cost of hiring a dispute lawyer depends on the complexity of your case. The value associated with having a dispute lawyer in your corner, however, can be immense. 

What is the duration of a typical shareholder dispute case?

Your shareholder dispute case will follow its own unique path, and many are settled prior to their court dates. The more legally challenging your case is, however, the longer its duration will likely be. Get in touch with us today!

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302, 15252 – 32nd Avenue Surrey, British Columbia V3Z 0R7
Phone: 604-542-9455
Fax: 604-542-9493

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