There are many important legal and financial issues when managing a San Diego investor dispute. Investor disputes in San Diego invariably come down to one factor: money. Are you concerned about the way you are being treated or your access to important company information? Are you being treated differently than other similar investors or shareholders? How can you resolve the important issues when managing a San Diego investor dispute or prevent one from happening in the first place?
The Operating Agreement or Shareholders Agreement
Almost every investor dispute can be traced back to the original operating agreement or shareholders agreement (or lack thereof). Every investment should be backed by sound contracts and agreements. Boilerplate downloaded forms found online will not sufficiently cover your unique circumstances. Effective investor agreements should not only cover the relationship between the parties, the enterprise at hand and how each party will contribute to make the effort a success. Sound business and corporate agreements anticipate best and worst case scenarios. What happens if the business is a tremendous success and additional shareholders or investors are added to the equation? What happens in the event of the incapacity or death of a critical player?
These important contracts should specify the nature of the investment and how it is to be repaid as well as how resulting profits are to be shared. You need to protect your interests from being “watered down” or from depleting the value of your position through a merger or acquisition.
Our Proven Attorneys Understand Important Issues in a San Diego Investor Dispute
The Watkins Firm has helped to resolve investment-related disputes in San Diego for more than four decades. After years of extensive experience in these cases, we can tell you most disputes are related to success, not failure. When a company succeeds and money is on the table the position of the investor must be protected from the outset through strong contracts and the presence of a well-crafted operating or shareholders’ agreement. A sound business investment agreement should establish decision making authorities, ownership shares, salaries or distributions and approvals required for expenditures.
Pro-Tip: “You should follow that sense that you have that something’s just not right. That should also be a sense that maybe I should get some help. And you should do it right away. because when shareholder or investor fraud or shareholder breach happens, it’s easy for a purpose. That is an opportunity for management. And it’s usually happening now.
They usually won’t do it unless it’s worth a lot of money. If let’s say you don’t have a shareholder agreement, or 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 has is still there. So if you are the squeaky wheel right away, before they go forward with whatever they’re doing, then you may profit from that. But if you’re not, then it’ll just happen. And you’ll, instead of being sharing in the profits, you’ll be fighting to claim you had rights to get some money back.
Often it’s going to be a conflict of interest between their obligation to their shareholders and their own personal interests. Everybody hears the term conflict of interest and they think it’s something like special or amazing or complicated, but it’s really not. This is the oldest con game. There is example you are working somewhere and you get access to checks coming in. So you go form a company in another state. That sounds just like the name on the checks that are coming in. And you start taking those checks and putting them in your own bank account. Well, think about that. If you’re a corporation you’re in management and you have a uncle that forms a company and you start sending business that way, and before, you know it, you taking assets from one company and giving it to another company, which technically you don’t have anything in writing as an ownership of, but you have a conflict of interest and you’re breaching your fiduciary duty. And so if the shareholders aren’t watching this happens, and I would say 20% of our litigation every month is based on shareholder disputes fights between investors and the corporation and breach of fiduciary duty.” – Dan Watkins, Founding Partner
When a dispute arises the underlying corporate agreement is the primary controlling document. When this important agreement is poorly crafted or fails to fully anticipate or speak to the dispute at hand our attorneys take a unique approach to disputes designed to resolve the important issues when managing a San Diego investor dispute in a timely and cost-effective manner. If you are concerned about your position as an investor or have become mired in harsh tactics or a dispute we invite you to review our podcast Episode 14 – Shareholders’ Rights and Disputes as well as the strong recommendations of our clients and contact the Watkins Firm or call 858-535-1511 for a complimentary consultation today.