As a small business owner, whether you’re just starting or you’re already up and running,…
Do you own and run your business in partnership with a friend, acquaintance or relation?
Is your business now facing problems because of disagreements with your partner or co-owner?
Pooling resources together to form and run a business has always been an age-long practice. Because of the various advantages accruable to this, not only traditional brick-and-mortar businesses form partnerships. Right now, many internet-based businesses are taking this route. In fact, many of the very popular and successful online businesses today are owned not by individuals but various persons who individually has a shareholding in the business.
The unfortunate thing however, is that partnership can sometimes go sour. Individual visions for the business could along the way become diverted. Relationship between the shareholders could go sour. And of course, these differences could seriously affect the performance of the business.
So, what do you do when disputes arise between shareholders?
There are several options to be considered when you are facing a shareholder dispute in your business. As already mentioned, these can be potentially disastrous for your business. So, you want to resolve them as quickly and cleanly as possible. Unfortunately, that’s not always easy. But here are some options to try.
Compromising is something that many people find hard to do. But when you have two people pulling in different directions, compromise is often the only option out there. If you can concede some ground and they can concede some too, the problem might be resolved in minutes! It’s all about finding that right trade-off. You can give them something that they want, and you can have something you want. Neither side will be entirely happy with the solution that is reached, but that’s the nature of compromise.
However unappealing it might seem to you right now, it’s surely best to put the dispute behind you as soon as possible, right?
2. Check the Law
These disputes can sometimes be resolved cleanly by consulting the law. When two people disagree on a certain issue, sometimes there is no way of coming to a resolution. But on other occasions, it might simply be a case of one person being right and the other person being wrong. If the law around shares and businesses lays it out in black and white, then no one can really argue with the outcome. This often takes time though. It means checking and rechecking laws and consulting past contracts that have been signed by those concerned. It’s something that should be tried if it applies to your situation.
3. Force Them Out
If things are so bad that you can’t possibly reach a settlement with the person who you are in disagreement with, forcing them out is an option. It certainly shouldn’t be the first thing that you try. But if nothing else is working for you, it is an option that should be looked at. First of all, offer to buy their shares. If they are as sick of the dispute as you are, they might be tempted to sell up and move on. If they are not willing to sell, this post on how to remove a shareholder from a Ltd company might help you. Some deals come with built-in departure option which can be triggered by a dispute too. So, consider that.
4. Work in the Interests of the Business
Sometimes, these disputes are not really about the business. Often, they are about personal disputes, agendas and vendettas. But these personal concerns should not be allowed to affect the performance or results of the business. So, if you are squabbling with a shareholder for no real reason, you should both aim to work in the interests of the business. This is much better for everyone. If you can both agree to put aside your differences and do what’s right for the business as a whole, everyone will benefit in the long-term. If this isn’t possible, you might have to consider the options discussed above.
Shareholder disputes are not a good thing for any business. You formed that partnership to get the best from your business. If, for any reason disputes arise it is important that you take actions and right on time. The above tips and suggestions will definitely help you resolve such shareholder disputes if they rear their ugly heads!