When shareholders disagree, it can be difficult to resolve the dispute without resorting to litigation. One of the most common issues in shareholder disputes is the valuation of the business. This is because the value of the business will determine how much each shareholder is entitled to in the event of a buyout or dissolution.
There are a number of factors that can affect the value of a business, including its assets, liabilities, earnings potential, and marketability. In order to arrive at a fair valuation, it is important to consider all of these factors.
In some cases, the shareholders may be able to agree on a valuation without the need for an independent appraisal. However, if there is no agreement, it may be necessary to hire a business appraiser to provide an expert opinion of value.
The business appraiser will use a variety of methods to arrive at a valuation, including the discounted cash flow method, the asset-based method, and the market-based method. The specific method used will depend on the nature of the business and the factors that are most relevant to its value.
Once the business has been valued, the shareholders can then use this information to negotiate a settlement. If they are unable to reach an agreement, the dispute may need to be resolved through litigation.
In addition to the valuation of the business, other issues that may arise in shareholder disputes include:
- The right to dividends
- The right to participate in management decisions
- The right to buy out the shares of another shareholder
- The right to dissolve the company
These issues can be complex and it is important to seek legal advice if you are involved in a shareholder dispute.
How to Resolve Shareholder Disputes
There are a number of ways to resolve shareholder disputes. Some of the most common methods include:
- Negotiation: This is the most common way to resolve disputes. The shareholders can try to work together to reach an agreement that is acceptable to both parties.
- Mediation: Mediation is a process where a neutral third party (the mediator) helps the shareholders to reach an agreement. The mediator does not impose a solution on the parties, but rather helps them to communicate and negotiate effectively.
- Arbitration: Arbitration is a process where the dispute is resolved by an arbitrator. The arbitrator is a neutral third party who is appointed by the parties or by a court. The arbitrator will hear the evidence from both sides and then issue a decision.
- Litigation: Litigation is the last resort for resolving shareholder disputes. If the parties are unable to reach an agreement through negotiation, mediation, or arbitration, they may need to file a lawsuit.
The best way to resolve a shareholder dispute will depend on the specific circumstances of the case. However, it is important to seek legal advice as soon as possible if you are involved in a dispute. An experienced attorney can help you to understand your rights and options and to protect your interests.
Conclusion
Business valuation and shareholder dispute are complex issues. However, by understanding the factors that affect the value of a business and the different methods that can be used to arrive at a valuation, you can be better prepared to resolve a shareholder dispute if it arises.
© 2023