Shareholders range from the average joe with stocks in a family’s private holding to municipal pension funds with large holdings. No matter whether the number of shares owned is large or small, a shareholder can potentially get entangled in a dispute with other shareholders or company owners. In these cases, it is best to consult with a seasoned commercial litigation attorney in Alabama for professional guidance.
Common Reasons for Shareholder Disputes in Alabama
- Shareholder agreement violation
There are several ways that a shareholder agreement can be violated. Selling shares is among the most common violation. For instance, there are specific rules in many shareholder agreements regarding the sale of shares. There may be clauses that dictate the particular circumstances in which a shareholder can sell stocks. There are specific limitations on who is eligible to purchase shares.
Whether you are a company or an individual shareholder, you should consider speaking with a business lawyer immediately if attempts at rectifying and handling the situation have not reaped any solutions.
- Change in direction of the company
Business partners generally agree on the same things in regard to where the business should go while creating a shareholder agreement. However, the vision for the future may get distorted or less clear with time as the company grows and its shareholders increase.
Typically, shareholders have a very different vision about how a business should be run. Disagreements can arise which can be particularly troubling for the shareholders that invested when the company was created. There needs to be a clear policy regarding shareholder voting for minimizing conflict.
- Minority shareholders may get disgruntled
Not being entirely in control is one of the cons of being a minority shareholder. Such shareholders can feel that all decisions are made without their consent. However, this is a situation that can be easily fixed. A shareholder agreement can balance the power by including a voting clause to avoid such conflict. Each shareholder can have one vote regardless of the number of shares owned. Furthermore, it can be specified that the votes need to be unanimous or pass by a certain percentage.
- General disagreements
Disagreements are bound to arise and there is not much that can be done about them. Certain shareholders may get upset over changes in personnel. Others may believe that certain potential investors don’t need to be allowed because of a conflict of interest. Reasons for shareholder disputes are endless. However, a fair and thorough shareholder agreement can significantly reduce the chances of it happening.
Shareholder Rights in Alabama
Shareholders are people with a share or ownership interest in a company or corporation. These are a few rights awarded to shareholders in Alabama:
- Shareholders of a company have the right to amend, adopt, or repeal emergency and initial bylaws of the company through the voting process
- Shareholders are entitled to copy and inspect various corporate documents, including basic financial documents and a list of shareholders
- Shareholders can elect directors (one or more) at the first annual shareholder’s meeting. They can change or elect more at each annual meeting thereafter.
- Corporations are required to hold shareholder meetings every year at a time fixed and stated in accordance with the company bylaws
- The company is required to notify the shareholders of the place, date, and time of each annual meeting in writing. This should be communicated at least 10 days before the meeting date.
- At a shareholder’s meeting, each outstanding share is usually entitled to one vote on every matter that is voted on
- Shareholders of business corporations in Alabama have the option to vote by proxy
- Any merger plan needs to be unanimously approved by all shareholders or as per the shareholder agreement
- Consent of shareholders is required for the sale of substantially all or all property and assets of the corporation
- Shareholder’s approval is needed before the company can be dissolved
- A fiduciary duty is owed by the majority of shareholders to the minority shareholders to not put the minority at a disadvantage by using their majority to control the corporation
- Shareholders are given the right to bring derivative suits for wrongs against the corporation on behalf of the corporation
Possible Options for Resolving Disputes
These are a few possible options to resolve disagreements and disputes between shareholders in Alabama:
- Direct discussions with an aim at a resolution
- Direct discussions regarding any sale or purchase of shareholder’s ownership interest
Business attorneys can provide helpful insight into shareholder dispute causes and rectification. They can help you determine the best way of resolving disagreements.
Talk to Experienced Business Litigation Attorneys in Alabama Today
Business relationships may tend to get strained over time. They may affect the operation of the company. The belief that a shareholder, manager, or director is not acting in the best interests of the company or fulfilling their fiduciary duties may result in the need for court intervention.
If you find yourself in the middle of a shareholder dispute, consult with the skilled and knowledgeable attorneys at the BHM Law Group. Give us a call today at 205-994-0902 or contact us online to set up a free and confidential consultation.