Shareholder dispute litigation is a highly complex area of the law that requires strategic representation and actionable advice. At Ryan G. Cole Law, PLLC, we have extensive experience handling shareholder disputes involving privately held corporations and other businesses in Dallas-Fort Worth and throughout North Texas.
When a shareholder dispute becomes a protracted legal battle, we have the skills and resources to go the distance. While many disputes can be settled without court intervention, we are well-equipped to litigate. fighting to protect our clients’ rights. When you consult with us, we will take the time to assess your circumstances and explore your legal options.
Above all, we will work in your best interests and leverage our skills and experience to achieve the best possible outcome. Contact our McKinney office today to discuss your case in confidence.
Common Reasons for Shareholder Disputes
Shareholder disputes typically arise for several reasons, such as:
- Objections to corporate management and operations
- Disputes over the direction of the company
- Suppression of minority owners
- Concerns about governance issues.
Conflicts can also arise when a shareholder’s misconduct adversely impacts the other shareholders.
Types of Shareholder Disputes Our Firm Handles
At Ryan G. Cole Law, we represent plaintiffs and defendants in shareholder disputes arising from:
Breach of Shareholder Agreement/Bylaws
A well-conceived shareholder agreement will specify the distribution of shares in a company, define different classes of shares, and establish the rights of holders of each type. Disputes often arise when an officer, director, or shareholder breaches the agreement. Such a breach often entails a party shares in violation of the terms governing sales by insiders.
The bylaws cover the company’s operations, including:
- How directors are appointed
- When shareholders will meet
- How finances will be managed and reported.
A company’s failure to comply with the rules and regulations outlined in the bylaws can lead to shareholder dispute litigation.
Breach of Fiduciary Duty
Generally, a fiduciary duty is an individual’s legal obligation to act in the best interests of another person or entity. In a corporate or business setting, officers and directors owe fiduciary duties to the shareholders. These duties are fundamental to the trust and integrity that form the backbone of our corporate relationships and decision-making processes. The following is a brief description of each duty:
- Duty of Care: This duty requires decision-makers to act with the level of care and diligence that a reasonably prudent person would exercise in similar circumstances, ensuring informed and rational decisions.
- Duty of Loyalty and Good Faith: This obligates fiduciaries to prioritize the interests of the corporation and its stakeholders above personal interests, and to act with honesty and integrity in all dealings.
- Duty of Honesty and Full Disclosure: This duty mandates that all material information, especially that which could influence decision-making or corporate actions, must be fully and truthfully disclosed.
- Duty to Refrain from Self-Dealing/Competition: This requires fiduciaries to avoid situations where their interests conflict with those of the corporation, and to abstain from competing against the corporation in any way.
- Duty to Account for Profits: Fiduciaries must not personally gain from their positions at the expense of the corporation and are required to disclose and hand over any profits made from their fiduciary position.
Adherence to these fiduciary duties is crucial for maintaining the ethical and legal integrity of our operations. Shareholder disputes often arise when these duties are breached. A primary example is the misappropriation of company assets. This applies particularly to officers and directors, who may be held legally accountable for such actions.
However, shareholders are not exempt from liability, even in the absence of a direct fiduciary duty. The scope of misappropriation includes, but is not limited to, the unauthorized utilization of company funds for personal purposes, the illicit appropriation of cash assets, and involvement in fraudulent disbursement activities.
Disagreement Over Company’s Direction
Shareholders, vested both financially and personally in a company’s success, frequently encounter conflicts over the strategic direction of the business. Such disputes typically surface when shareholders perceive that the decisions of the company’s leadership could potentially undermine the business’s value. Common areas of contention include:
- Decisions on Product Lines: This includes disagreements over whether to continue or discontinue certain product lines, which can significantly impact the company’s market presence and revenue streams.
- Expansion into New Markets: The choice to venture into new markets is often a strategic move that can bring about divergent views among shareholders regarding the potential risks and rewards.
- Relocation of Facilities: The decision to relocate operational facilities can lead to disputes due to the substantial investment and the potential effect on the company’s logistics and workforce.
- Making Capital Investments: Disagreements often arise around capital investments, where shareholders might have differing opinions on the allocation of resources and the long-term implications of such investments on the company’s financial health.
In each of these scenarios, the crux of the dispute lies in balancing the risk with the growth potential, requiring a nuanced understanding of both the business’s objectives and the stakeholders’ expectations.
Unsuitable Mergers and Acquisitions
Challenges to proposed mergers and acquisitions are a common bone of contention. These disputes typically arise when shareholders claim the company’s officers and directors have not adequately assessed the true value of the transaction in question. Additionally, legal action may arise if the shareholders believe a deal in consideration does not serve their best interests, particularly in terms of maximizing shareholder value.
Such disputes often hinge on the intricate details of the proposed merger or acquisition, including the financial implications, strategic fit, and potential long-term benefits or drawbacks. Corporate leaders must undertake a thorough and transparent evaluation process and ensure that all decisions are made with due diligence and a clear focus on enhancing shareholder value.
Minority Shareholder Oppression
In the context of corporate governance, minority shareholder oppression is an issue of significant concern. This situation arises when majority shareholders utilize their controlling interest to conduct the company’s affairs in a manner that disproportionately and adversely affects minority shareholders. Such oppressive actions may manifest in various forms, including:
- Exclusion from Key Decisions: This involves systematically excluding minority shareholders from critical financial or managerial decision-making processes, thereby diminishing their influence and rights within the company.
- Withholding of Dividends: Another common form of oppression is refusing to distribute dividends while retaining business profits. Majority shareholders might divert these funds towards exorbitant salaries and bonuses for themselves, to the detriment of minority shareholders.
- Altering Company’s Core Aspects: Minority shareholders often face challenges when the majority alters the company’s structure, operations, or strategic direction in ways that deviate significantly from initial expectations or agreements.
Such practices not only undermine the rights and investments of minority shareholders but can also lead to legal disputes, highlighting the need for fairness and transparency in corporate governance to protect the interests of all shareholders.
Resolving Shareholder Disputes in Dallas-Fort Worth
Given the complexities involved in business and commercial litigation, it is crucial to have an experienced shareholder dispute attorney. That’s where our Ryan G. Cole Law steps in. We have extensive experience negotiating and litigating shareholder disputes and an impressive track record of successful outcomes.
Our attorneys consider the shareholder agreement’s provisions for dispute resolution, which may include arbitration or mediation. If we cannot settle the dispute through negotiations, we may recommend that shareholders take legal action, whether the objective is the removal of a director, the appointment of a new director, a buyout, or another legal remedy
Knowing that shareholder disputes can disrupt business operations, we work to achieve real-world solutions through negotiated settlements. But we prepare each case for trial to give us an advantage at the bargaining table and, if necessary, in the courtroom. Above all, we will work in your best interests and focus on your goals.
Contact Our Experienced North Texas Shareholder Dispute Attorney
Because a shareholder dispute can quickly become high-stakes litigation, having the informed representation Ryan G. Cole Law provides is essential. Contact our office today to schedule your initial consultation.