Make Informed and Strategic Decisions with the Help of an Experienced NYC Shareholder Dispute Attorney
Disputes between the owners of a business can disrupt business operations and threaten the business’s viability as a going concern. As a result, when these disputes arise, it is essential to target an efficient resolution that duly protects not only the business’s shareholders but also its clients or customers. Engaging an experienced NYC shareholder dispute attorney is the first step toward achieving a favorable resolution that allows everyone to move on.
Daniel Knox has extensive experience representing clients in these types of matters. If you are facing a shareholder dispute in New York City, he can help you make informed and strategic decisions, and he can represent you in all necessary dispute resolution proceedings. Mr. Knox regularly represents clients in settlement negotiations, mediation, arbitration, and litigation, and he can use his experience to help you resolve and move on from your dispute as efficiently as possible.
Important Considerations for Shareholder Disputes in New York City
Due to their potential implications, shareholder disputes require a forward-thinking approach and a resolution strategy custom-tailored to the circumstances at hand. This is true whether your ultimate goal is to save the business or sever your relationship with your fellow shareholders.
Shareholder disputes present a variety of potential issues, and when facing a dispute, the shareholder agreement is the first place to look for guidance. Regardless of your ultimate goal, it will be necessary to examine the shareholder agreement to see what it says about issues including:
- Shareholder Rights and Obligations – In many (but not all) cases, shareholder disputes can be resolved by ensuring that all parties accurately understand their respective rights and obligations.
- Alternative Dispute Resolution (ADR) – Many shareholder agreements contain mandatory ADR provisions that require shareholders to pursue mediation or arbitration (or both) before going to court.
- Remedies – Many shareholder agreements contain provisions that limit or specify the remedies that are available to the shareholders in the event of a dispute as well.
- Valuation – When it is in one or more shareholders’ best interests to part ways, the shareholder agreement’s valuation provisions (if any) will play a key role in determining the shareholders’ respective financial rights.
- Dissolution – Shareholder agreements also frequently contain provisions that call for dissolution (or provide guidelines for dissolution) in the event of an impasse. These provisions will play a central role in many shareholder disputes.
These are just a small sampling of the issues that can (and often will) arise in shareholder disputes. To ensure that you are considering all pertinent issues and moving forward with full knowledge of the information you need to make sound decisions, contact us to schedule an appointment with Daniel Knox today.
Types of Shareholder Disputes
Shareholder disputes can arise from a variety of issues, often stemming from breaches of fiduciary duties, disagreements over financial management, or misconduct by one or more parties. These disputes can have far-reaching consequences, threatening the stability and profitability of the business. Understanding the most common types of shareholder disputes can help shareholders identify potential issues early and seek appropriate legal remedies.
Fraud and Misrepresentation
Fraud and misrepresentation are common triggers for shareholder disputes. These issues can arise when shareholders or directors provide false information about the company’s financial health, hide critical details during shareholder meetings, or engage in deceptive practices to manipulate other shareholders. Fraudulent behavior undermines trust and can lead to significant financial losses for shareholders. Resolving such disputes may involve investigating the allegations, recovering misappropriated assets, and holding responsible parties accountable through direct or derivative actions.
Breach of Fiduciary Duties
Directors and majority shareholders owe fiduciary duties to minority shareholders, including the duties of loyalty, care, and good faith. When these duties are breached—such as by prioritizing personal gain over the company’s or shareholders’ interests—disputes are likely to arise. Examples include self-dealing transactions, mismanagement of company funds, or unfair treatment of minority shareholders. Breaches of fiduciary duties can harm the company’s reputation and financial standing, making it essential to address these disputes promptly through appropriate legal action.
Misappropriation of Company Assets
Misappropriation occurs when a shareholder, director, or officer improperly uses company resources for personal benefit. This can include unauthorized withdrawals, misuse of intellectual property, or improper allocation of profits. Such actions not only violate fiduciary duties but also create significant financial and operational challenges for the business. Addressing these disputes often requires forensic accounting and other investigative measures to trace and recover misused assets.
Direct Actions vs. Derivative Actions
When a shareholder dispute leads to a lawsuit, it’s important to understand whether the claim is best pursued as a direct action or a derivative action. The distinction between the two is significant, as it determines who has standing to sue and how any potential recovery will be distributed.
Direct Actions
Direct actions are brought by individual shareholders to address harm done specifically to their personal interests. For example, a shareholder might file a direct action if they were unfairly excluded from profit distributions or if their voting rights were unlawfully restricted. Any damages awarded in a direct action typically go directly to the shareholder who initiated the lawsuit.
Derivative Actions
In contrast, derivative actions are brought on behalf of the company itself. These lawsuits address harm done to the business, such as breaches of fiduciary duty by directors or officers, fraud, or misappropriation of company assets. While a single shareholder may initiate a derivative action, any recovery is typically paid to the company, as the harm affects all shareholders collectively. Derivative actions are particularly useful when majority shareholders or directors fail to take appropriate action to protect the company’s interests.
Schedule an Appointment with NYC Shareholder Dispute Attorney Daniel Knox
Contact us today to schedule an appointment with Daniel Knox. We will arrange for you to speak with Mr. Knox in strict confidence as soon as possible.