What happens when there is a dispute between a shareholder and a corporate Board of Directors?  Genuine disagreement can arise regarding the direction of the company and corporate strategy.  What steps should a shareholder take if this is a concern?

Often, dispute between a shareholder and a corporate Board of Directors involve personal relationships and the behavior of one or more of the parties.  Concerns may be based upon the influence of an outside company owned or controlled by one of the Directors, and the influence of that relationship upon the corporation.  Shareholders may be concerned whether the Board is meeting its legal responsibilities and duties, and whether conflicts of interest are clouding the actions of the Board.

The experienced business and corporate attorneys at the Watkins Firm have more than 40 years of experience resolving disputes between shareholders and their Board of Directors.

Minority shareholders may have additional protections under California law.  When a minority shareholder is concerned about the action of a board member or the board in general it is important to take action to protect their investment and the security of their position.

A dispute between a shareholder and a corporate Board of Directors may require the shareholder to file a “derivative lawsuit.” In a derivative action the shareholder files a lawsuit against the Board on behalf of the Corporation.

Other disputes may be best managed through negotiations, and ultimately mediation or arbitration.  Business litigation to resolve a dispute with a Board of Directors can be time consuming and costly.  Our attorneys provide insight and counsel into the dispute, and help to develop strategic options and goals for the resolution of the core issues.  We take prudent and consistent action to resolve these disputes in a timely, cost-effective and efficient manner.

Pro-Tip: “There is a lot we can do as attorneys to help protect our clients interests, especially in disputes between a shareholder and majority interests or the Board of Directors. We like to say, if it’s off a penny, it’s off a million. So we look at the financial disclosures you’ve given, and if they don’t add up or doesn’t seem straightforward, we suggest you demand for documentation. And if they don’t give it, that’s sort of like, them pleading the fifth, you know, something’s wrong when they’re not willing to give their investors, their owners full access, full transparency into what’s going on with the company.

That sense that you have that something’s just not right, that should also be a sense that maybe you should contact Watkins Firm for some help. And you should do it right away. because, when shareholder fraud or shareholder breach happens, it’s usually for a purpose. That is an opportunity for management. It’s usually happening right now, and it usually involves a substantial amount of money.

They usually won’t do it unless it’s worth something. If you have a weak shareholder agreement and, management has broad discretion to do a lot of things, and they’re getting ready to do some questionable things, to make a big profit. And you come along and say, ‘wait a minute, I think something’s wrong here.’ And you pose an objection. Well, before you file a lawsuit, this opportunity that management still exists. So if you are the squeaky wheel right away, before they go forward with whatever they’re doing, then you may either put a stop to that or profit from that. But if you’re not, then it’ll just happen. And instead of being sharing in the profits, you’ll be fighting to claim you had rights to get some money back.” – Dan Watkins, Founding Partner

We invite you to review our podcast Episode 14 – Shareholders’ Rights as well as the strong recommendations of our clients and contact the Watkins Firm or call 858-535-1511 for a complimentary consultation today.