Texas Shareholder Dispute Attorneys
When businesses run smoothly and profitably, it’s a good thing for shareholders. However, if shareholders are embroiled in a dispute, it can have far-reaching effects on everyone involved.
Because of the considerable differences between companies and between business disputes, there’s no singular method for resolving shareholder disputes. At Mahendru, P.C., we have helped countless Texas shareholders settle disagreements, and we’re ready to help you create a solution tailored to your situation.
Types of Cases Handled for Shareholder Disputes
We have experience with a considerable range of shareholder disputes. These are some of the most common types of cases we’ve resolved for our clients:
Freeze-Outs and Squeeze-Outs
Freeze-outs or squeeze-outs happen when majority shareholders decide to force minority shareholders to sell their shares. They usually do this in a bid to try to gain full control of the company.
These kinds of decisions are not expressly illegal. However, if a squeeze-out is happening unfairly or if it constitutes shareholder oppression, you may have recourse. A business attorney for shareholder disputes can help you understand your options.
Embezzlement and Asset Misappropriation
Corporate executives have a fiduciary duty to the corporation and its shareholders. If an executive is managing assets unwisely or outright stealing from the company, shareholders may need to pursue legal action to resolve the issue.
Violations of Non-Compete, Non-Solicitation, and Confidentiality Agreements
In many industries, trade secrets and non-compete agreements are an essential part of preserving a company’s integrity and success. If it’s revealed that someone is violating one or more key company policies, shareholder disputes are likely to arise.
For instance, if a shareholder (or someone else) is disclosing trade secrets, the other shareholders may file a lawsuit. If the action is successful, the judge may issue an injunction prohibiting the defendant from continuing to share trade secrets.
Nepotism in Hiring
If a company’s executives make a habit of hiring their relatives instead of seeking out qualified candidates, the company may suffer significantly. Shareholders may first attempt to pressure the company to stop, but if the practice continues, they may need to resort to legal action.
Lack of Transparency
Officers’ fiduciary duty to the company and shareholders includes being transparent. If company officers do any of the following, they are likely violating their fiduciary duty:
- Not allowing shareholders access to the company’s books and records
- Not allowing shareholders on the premises
- Refusing to declare distributions and dividends
If a shareholder has a reasonable purpose for doing so, they may request access to the company’s records, and the company must comply. If it doesn’t, the shareholder may file a lawsuit to compel the company to hand over the records.
Voting and Decision-Making Concerns
Sometimes, shareholders disagree when it comes to voting rights and who has the power to make key decisions. The right attorney can help guide you through challenges like these and create clear bylaws and agreements that reduce the risk of it happening again.
Direct vs. Derivative Shareholder Actions
Generally, when shareholders bring legal action in a dispute, that action falls into one of two categories:
- Direct: Shareholders take legal action in response to direct harm to them
- Derivative: Shareholders take legal action in response to harm done to the company
For example, if a shareholder is unfairly denied voting rights, they may file a lawsuit to regain those rights. This is considered a direct action because the shareholder is pursuing legal action on their own behalf.
Now, suppose that there is evidence that a company officer is mismanaging company assets. In this case, shareholders may sue in an effort to recoup lost assets. Because the shareholders are suing on behalf of the company, this would be considered a derivative action.
The Value of Shareholder Agreements
There’s no way to completely erase the possibility of shareholder disputes. However, having a thorough, written shareholder agreement can reduce your risk of a dispute and make disputes far easier to resolve when they do arise.
Because shareholder dispute law firms deal with shareholder disputes almost every day, they’re especially well-equipped to draft shareholder agreements. Thorough agreements will usually include at least the following:
- A complete outline of shareholder responsibilities
- A complete outline of the role shareholders play in business decisions
- Voting and decision-making rules
- Clear, detailed processes for dispute resolution
- Procedures for removing shareholders who may be harmful to the company
Our business shareholder dispute lawyers have helped companies of all sizes create customized agreements to shield themselves from unexpected disputes.
How a Shareholder Dispute Attorney Can Help
Our experienced attorneys can help with shareholder dispute resolution in more ways than you may realize. These are some of the ways we may be able to assist:
- Drafting shareholder agreements
- Helping shareholders negotiate a solution to their issues
- Guiding you through mediation or arbitration
- Pursuing litigation to resolve shareholder disputes if needed
Because we work with Texas business law on a daily basis, we can also help you ensure that any agreements or policies you create are fully legally compliant.
Frequently Asked Questions
Is a Shareholder Dispute the Same as a Partnership Dispute?
No. Shareholder disputes are brought by those who own shares in a business but aren’t generally responsible for daily operations. Partnership disputes are typically among people who both own and manage a particular business.
Can You Resolve a Shareholder Dispute Without a Lawyer?
Maybe. However, because shareholder dispute attorneys have extensive experience navigating disputes, they may make the resolution faster, easier, and less costly.
What’s the Difference Between Mediation and Arbitration?
Mediation typically involves working with a trained facilitator who helps guide the parties to a decision. The parties are not required to reach an agreement, and any agreement is usually not legally binding.
Arbitration is more formal. It usually involves both sides presenting their cases to an arbitrator, who then makes a binding ruling.
Caught in a Shareholder Dispute?
The right shareholder agreement can be very helpful, but you may encounter shareholder disputes even if you’ve taken ample precautions. If you’re facing this situation, let our shareholder dispute attorneys help.
We founded Mahendru, P.C. in 2001 with the goal of helping shareholders and business owners confront problems head-on and resolve them expediently. Our attorneys have been recognized by Super Lawyers, Lawdragon, Best Lawyers, and elsewhere.
If you need a shareholder dispute lawyer, don’t wait — get in touch today to schedule your consultation.