Companies that are run in a profitable and proper way are usually the ones shareholders have the most interest in.
However, it is not uncommon for shareholders in an incorporated corporation to disagree on certain issues, which can actually end up damaging the profitable operations of the company. Thus, it is best to know how to prevent shareholder litigation.
Including the right clauses
Forbes illuminates ways to avoid disputes between shareholders. The first is to execute a comprehensive shareholders’ agreement in order to avoid disputes. This should be done the moment a business is established, but it is better late than never.
There are many clauses to include in an agreement. This can include mandating that minority shareholders sell their shares on the same terms that majority shareholders do. This also includes dealing with situations where votes end up tied. Clauses limiting trades may help, too.
Keeping comprehensive records
Comprehensive and accurate record-keeping is also crucial. Information within these records may potentially help you head off any budding disputes before they get out of control.
Information recorded can include things like decision logs, bylaws, minutes from meetings among shareholders, and other documents. This documentation can clear up any misunderstandings and lay arguments to rest.
If an argument escalates beyond the point that it is easy to end, then if possible, lead shareholders to mediation rather than litigation. This costs less in time and money, preserves the business’ privacy, and preserves business ties, which are crucial for a business continuing to flourish. Thus, it is a net benefit to all.