Shareholders agreements are commonly entered into by shareholders of closely held corporations. The main purpose of having a shareholders agreement is to govern the rights and obligations of the shareholders both during the term of the agreement and upon termination of his/her relationship with the corporation, whether such termination is voluntary or involuntary. Shareholder Compensation Disputes often result from the misunderstanding of each others expectations in respect of the business. Shareholder Compensation Disputes can be life threatening events for closely held businesses, endangering the equity that shareholders have built over many years of hard work.

    Shareholder Compensation Disputes are crippling many organizations because they create such an annoyance that neither of the stockholders cares what happens to the business for which they have given their blood and sweat. The shareholders, owners of the business entity, are usually compensated employees of the corporation, with varying levels of compensation. Sometimes, the corporation transacts business with one of the shareholders or another entity controlled by a shareholder. A shareholder's perception of these factors may lead to a breakdown in communications between the shareholders, which may result in shareholder compensation disputes. It is important to agree on what the amount of the remuneration is going to be and what it is going to be based on to avoid shareholder compensation disputes. That could be hours of work, performance by profit centers, seniority, age, experience, education background, etc.

    Shareholder Compensation Disputes often lead to litigation between shareholders, which can cause great financial damage to the corporation and impair its future advancement. By anticipating possible areas of dissention and providing a means of resolving disputes, written agreements can help to avoid the costs of litigation and damage to the company as a result of the shareholder Compensation Disputes. Agreements generally control over principles of fiduciary duty or other obligations that might exist among shareholders. Where the parties have considered an issue and determined among themselves how it should be handled, courts generally uphold the parties’ intentions provided that they are clearly and unambiguously stated.
 
    Thus, if corporate funds or assets have been misappropriated by a controlling shareholder to the detriment of the corporation, that shareholder may be liable to the corporation for damages for breach of fiduciary duty. If an individual abuses his position and misappropriates corporate assets or diverts a corporate opportunity to his own advantage resulting to shareholder compensation disputes, he will be liable to the corporation for damages. A shareholder who pursues this remedy would file a derivative action, on behalf of the corporation. Any damages that may be awarded would endure to the benefit of the corporation.