Shareholder Disputes – Frequently Asked Questions
Q: I am having some difficulty obtaining information from my business partner. What are some common examples of shareholder disputes?
A: Disputes between shareholders arise for any number of reasons but it is not uncommon for the following issues to cause tension: breach of directors’ duties, company’s strategy & management, dividend policies, disparities between salaries, separate business interests, failure to provide financial, accounting and statutory information, exclusion from meetings, breaches of shareholders agreements/partnership deeds.
Q: What rights do I have if I disagree with other shareholders about decisions and strategy for the company?
A: An individual shareholder’s rights will generally depend on the terms of any shareholders agreement and the company’s articles of incorporation.
Q: How can I enforce my rights as a shareholder?
A: There are various options, including: Proposing a resolution at a general meeting which redresses the situation; asking the board of directors to take action in the company’s name against an individual director (because generally the shareholders cannot sue in the company’s name); suing the directors by means of a derivative action
Q: As a director, what should I do if I feel that the board is acting improperly?
A: It is essential to take action if you feel that the board is acting improperly. The most appropriate course will depend on the circumstances. Please contact a corporate attorney to discuss your options.
Q: What fiduciary duties do directors have?
A: There may be duties listed in the company’s articles or the director’s employment contract, but the most common fiduciary duties are: to act in good faith in the best interest of the company; to act for proper purposes; not to make secret profits; to avoid conflicts of interest
Q: What are the consequences for a director in breach of their fiduciary duties?
A: Typical remedies for breach of fiduciary duty include damages for loss of profit and recovery of profits earned by the director when acting in breach of duty. Alternatively, directors who act recklessly or carelessly may be responsible for any resultant loss to the other directors of a company and the shareholders, and damages may be recovered in a civil action for negligence.