Any complaint alleging a minority shareholder has been unfairly prejudiced is a law suit brought against the other shareholders in their personal capacity. Where unfair prejudice can be established, the Companies Act provides that the court may make such order as it thinks fit. Although this means the court has very wide powers to make almost any order, by far the most common order made by the court is an order that one or more of the shareholders should purchase the shareholding of the other shareholder. Normally, the court will order the majority shareholders must purchase the shareholding of the minority shareholder at a fair value.

These and many other scenarios can threaten the continuation of successful owner-managed businesses. They can also jeopardize the financial, professional and personal interests of a company's shareholders. Without a plan to deal with unforeseen or difficult circumstances, the resulting conflict among shareholders can have dire consequences.

In practice, the first thing to do in most Shareholder Corporate Business Disputes is to secure the Company assets and protect them from the other shareholders. This may mean double checking the Company bank mandate. Checks should also be carried out to make sure that Company monies haven’t been paid out to lawyers to fund the battle ahead.

The best way to avoid the complications of Shareholder Corporate Business Disputes is to have a comprehensive shareholders' agreement drawn up and regularly reviewed. A shareholders' agreement clearly defines the rights and obligations of shareholders, and sets out guidelines for how the corporation will be administered. It describes, for example: what constitutes "major" decisions and how they will be made (e.g. by unanimous agreement, majority rules or a combination?); how owner operators will be compensated (e.g. income, dividends or other means); how the business will be valued (e.g. by an independent appraiser and regularly updated); how disputes will be handled (e.g. identifying an arbitrator and when he/she might be called in).

A well-thought out agreement will keep the corporation running smoothly in the face of future events such as the death, disability or retirement of a shareholder. It will answer questions, such as: What are the obligations or options of the remaining shareholders with respect to the departing shareholder's shares? What are the rights of the departing shareholder or his/her estate? How will the departing shareholder's stake in the business be valued? How would a buyout be funded in the case of a shareholder's death (e.g. life insurance)? How should the buyout be structured to minimize tax and cash flow consequences?

Structuring an effective agreement requires independent advice and participation by all shareholders. It can be a trial to work through, sometimes surfacing issues shareholders would rather not face.

California Shareholder Corporate Business Disputes Lawyer, together with your adviser, can help you work through the issues most pertinent to your business, and structure an agreement accordingly. No two businesses are exactly alike; so don't settle for a generic agreement. If a shareholder dispute does arise, California Shareholder Corporate Business Disputes Lawyer can also help mediate the dispute, providing balanced, independent analysis of the issues and how they can be resolved with minimum disruption to the business.