Shareholder dispute litigation is a highly specialized and complicated area of the law that requires strategic representation. At Vaziri Law LLC, we litigate complex shareholder disputes involving privately held corporations and related business entities throughout Chicago.
At times, shareholder disputes can become a protracted legal battle, and we are ready to go the distance when necessary. While many disputes can be settled outside of court, we are well-equipped to litigate. Above all, we are focused exclusively on our client’s interests and objectives and work to achieve favorable outcomes. Contact our office today to get started.
Common Reasons for a Shareholder Dispute
Shareholder disputes can arise for several reasons, such as objections to corporate management and operations, disputes over the direction of the company, suppression of minority shareholders, and concerns about governance issues. Conflicts can also arise when the actions of a shareholder adversely affect other shareholders. At Vaziri Law LLC, we represent clients in shareholder disputes arising from:
Breach of Shareholder Agreement/Bylaws
The shareholder agreement outlines the distribution of shares in a company, defines the different types of shares, and sets forth the rights of holders of each type. Disputes can arise when an officer, director, or shareholder breaches the agreement; for example, by selling shares in violation of the terms governing sales by insiders.
The bylaws detail how the company’s operations are governed, including how directors will be appointed, when shareholders will meet, and how finances will be managed and reported. The failure of a company to abide by the rules and regulations in the bylaws can lead to shareholder dispute litigation.
Breach of Fiduciary Duty
A fiduciary duty is a legal obligation by which an individual has to act in the best interests of another person or entity. Officer and directors owe fiduciary duties to the shareholders and the company, including:
- Duty of care
- Duty of loyalty and good faith
- Duty of honesty and full disclosure
- Duty to refrain from self-dealing/competition
- Duty to account for profits
Shareholder disputes often arise when these duties are breached. Examples include misappropriating company assets, insider trading, and self-dealing.
Misappropriation of Company Assets
An officer or director who misappropriates company assets can be held liable for breach of fiduciary duty, while a shareholder can also be subject to liability even if no fiduciary duty is owed. Misappropriation can involve using company funds for personal use, theft of cash on hand, or fraudulent disbursements.
Disagreement Over Company’s Direction
Shareholders have both a financial stake and personal interest in the success of a company. Conflicts often arise when shareholders believe that decisions made by the company’s leaders will damage the value of the business, such as:
- Continuing or discontinuing product lines
- Expanding into new markets
- Relocating facilities
- Making capital investments
Unsuitable Mergers and Acquisitions
Shareholder disputes often involve a challenge to a proposed merger or acquisition. A lawsuit may arise when officers and directors fail to accurately determine the value of the proposed transaction or if the deal fails to maximize shareholder value.
Minority Shareholder Oppression Dispute
Shareholder oppression occurs when the majority shareholders use their position to operate the company in ways that systematically disadvantage minority shareholders. This may involve:
- Excluding minority shareholders from important financial or management decisions
- Refusing to pay dividends and retaining business profits to pay themselves higher salaries and bonuses
- Changing the structure, operations, or direction of the business from what the minority shareholders expected or were told initially
Resolving a Shareholder Dispute in Chicago
The first step is to look to the shareholder agreement which typically includes options for dispute resolution (e.g. arbitration, mediation). When a settlement cannot be reached, shareholders can file a lawsuit seeking removal of a director, appointment of a new director, a buyout, or another legal remedy.
Given the complexities involved in business and commercial litigation, it is crucial to have an experienced shareholder dispute attorney in your corner. This is where Vaziri Law LLC can help. We can prosecute and defend shareholder litigation and have a proven history of achieving positive outcomes in and out of the courtroom.
We are keenly aware that an unresolved shareholder dispute can be disruptive to a company’s operation and may ultimately lead to its demise. For this reason, we work to achieve real-world solutions through negotiated settlements. Our trial-ready approach gives us an advantage at the bargaining table and allows us to provide aggressive courtroom representation when necessary. Above all, we work in the best interest of our clients at all times, focused on their goals and objectives.
Contact Our Chicago Shareholder Dispute Attorney
A shareholder dispute can quickly become high-stakes litigation, which makes it crucial to have the informed representation Vaziri Law LLC provides. Contact our office today to schedule your initial consultation.