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Business Disputes

Navigating Shareholder and Partnership Disputes

October 17, 2022

When partners or shareholders come into conflict, the situation often involves a complex web of personal, professional, financial, and legal questions. How you respond to the situation can have profound consequences for the future of your business. An experienced business dispute lawyer can help you navigate your dispute, resolve your conflict, and move your business forward. 

Understand the Dynamics

Any partnership or shareholder dispute breaks down into a majority position versus a minority position. These disputes typically arise when the people in the minority position feel that their voices aren’t being heard. In many cases, it may be several people against one, which can be especially difficult. Those who are in the majority position should remember that they aren’t necessarily correct simply because they have more people on their side. Those who are in the minority position should understand that their interests may be rightfully subordinate to the interests of the business as a whole. These disputes are adversarial in nature, but they can become outright hostile if you fail to understand the dynamics involved. 

Keep Your Emotions in Check

As difficult as it might be, you need to set aside your personal feelings about the dispute. After all, this is business, and the potential costs of the dispute could far outweigh what you may be able to achieve. Both sides should strive to maintain a respectful, professional atmosphere as they try to work through their issues. And just as they should avoid being disrespectful, both sides should avoid the temptation to take offense at perceived slights. Disputes can quickly metastasize into something far worse when emotion takes over, and litigation often becomes inevitable. 

Read Your Documents

The first step in navigating a shareholder or partnership dispute is to review your business’s foundational documents, specifically the partnership or shareholder agreement. These documents lay out the rights and remedies of shareholders or partners in the event of a conflict that can’t be resolved. It is not at all uncommon for disputes to erupt and one or both sides are not following the procedures laid out in the documents. Other common issues include failing to exercise their remedies or misunderstanding their rights under the documents. Obviously, this can significantly undermine your position – before taking any drastic steps, read your documents and understand how they will apply to your issue. 

Consult with an Attorney

Unfortunately, consulting your documents may not clarify the situation. It is fairly common for people to use form documents when establishing their businesses, and these documents are not always the best fit. Even worse, these documents sometimes contain inherent conflicts. Alternatively, they may be difficult to understand and interpret. An experienced attorney can review your documents and provide some clarity as to how they apply to your dispute. From there, your lawyer can help in the following ways: 

  • They can explain your options for resolving the dispute
  • They can work with you to develop a strategy for moving forward
  • They can represent you in negotiating a resolution outside of litigation

In many cases, the parties get so focused on being “right” that they neglect to consider what options are available to them. Understanding the remedies available to you is essential to successfully resolve the conflict. 

Return to the Bargaining Table

Once you have discussed your situation, you now need to make a second good-faith effort to negotiate a resolution. Your entire business is at stake, including the relationships with your partners, customers, and clients. Again, engaging an attorney can help in resolving the conflict. They can bring a fresh perspective and a cooler head that can help diffuse a tense situation. Whether or not you engage an attorney, we recommend that you make at least one more effort to resolve the issue before reaching the point of no return.

Litigation or ADR?

If you are unable to resolve your dispute, your next step would be to file suit. Litigation tends to be a “winner takes all” remedy, but it is sometimes your best option. Courts can award money judgments as well as enforce equitable remedies such as injunctions or rescission of contracts. 

However, mediation, arbitration, or other alternative dispute resolutions can be attractive options. They can allow the parties to retain some control over the situation and achieve an outcome that is agreeable to both sides. An attorney can provide guidance as to whether one of these remedies would make sense for you. 

Contact Ragain & Clark for Help with Your Shareholder or Partnership Dispute 

At Ragain & Clark, we have decades of experience in helping both Wyoming and Montana businesses navigate whatever challenges they may face. If you need help with a shareholder or partnership dispute, contact us today by calling 406-651-8888 (Billings) or 307-388-6400 (Worland) to schedule a consultation to discuss your case.


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