What is the most timely and efficient strategy to resolve a conflict between shareholders or investors in San Diego or throughout California?  Shareholder disputes in San Diego are unfortunately common between owners, shareholders and investors in corporate entities.  Shareholder and investor disputes are usually about one thing: money.   Many people think that disputes and business litigation increases when times are tough or when something has gone poorly.  Quite the contrary. Disputes between shareholders most often occur when business is booming, and when the associated numbers and profits grow larger and larger.

Important Keys to Resolve a Conflict Between Shareholders or Investors

• In most investor and shareholder disputes, the central issue is money.
• The dispute can resolve around the actions of a majority or minority shareholder, the failure to declare a dividend or to take action, commingling, unclear corporate documents, or accounting irregularities, to name a few.
• The key to resolve a conflict between shareholders or investors is a thorough, well-documented chronology of events, and a mastery of associated damages.

Examples of a Conflict Between Shareholders or Investors

There may be concerns about misappropriation of funds or embezzlement, the failure to declare rightful dividends or even questions regarding accounting and the financial books.  There may be a person or persons who are acting in their own interests in violation of their fiduciary duty.  There might be a disagreement over a hiring or firing decision, expansion versus internal reinvestment, or simply differing opinions or incompatibilities which make the business relationship difficult.  In more aggressive situations, strategies such as squeeze outs, freeze outs, denial of access to the books and/or corporate records threaten your position, investment and rights.

In many of these cases the parties perceive a different interpretation of the controlling corporate documents such as the operating agreement or shareholders’ agreement.  Their argument of “hey, we just disagree…” doesn’t protect your investment of time and money or the future of your holdings. You must assert your rights as a shareholder or investor in order to protect your interests and get the answers to your questions.

There is simply much more at stake, and not just in terms of money (although it always comes back to money).  In order to resolve a Conflict between shareholders or investors often, one must often address issues of access or control.  Success breeds a desire to have more of a say in how rising profits are invested and divided.  This isn’t simply a matter of greed, it’s about protecting and maximizing your position and the profitability that position generates.

Proven Strategies to Resolve a Conflict Between Shareholders or Investors

The Watkins Firm draws on more than 40 years of experience in these cases, and employs a unique and proven strategy to resolve a conflict between shareholders or investors that is specifically designed to accomplish our client’s goals and objectives in a timely and cost-efficient manner.  The Watkins Firm is able to resolve the vast majority of our shareholder and investor disputes through effective, leveraged negotiation.  This is the least expensive, and fastest way to manage a dispute of this nature.  Shareholders and investors have rights and our attorneys take proven, effective steps to gain the attention of the other party and begin work to resolve the issue(s) at hand.

In some cases this may require clarification or modification of existing LLC operating agreements or the shareholders’ agreement.  The effectiveness of the shareholder agreement and corporate documents will do a lot to protect your position and the strength of your corporation.  Effective corporate documents anticipate all potential scenarios, and address them in advance.

This leaves less room for misunderstanding, manipulation, game playing and in the end disputes and business litigation.  Shareholder and investor disputes distract business ownership from the primary focus of running the business and building upon success.  The attorneys at the Watkins Firm have decades of experience in drafting corporate documents and shareholder agreements that foster smoother business operations.  When a dispute or litigation arises we work effectively to resolve these disputes in an effective and cost-efficient manner.

Pro-Tip: ” We’ve had so many shareholder fights where a company, a group of friends, or a group of friends who know friends, maybe 30 people invest in a company and it’ll be doing well, but not great. And the investors, the shareholders won’t be receiving disclosures, or they will be receiving them, but they sort of don’t add up. And then they do an investigation and they come to some law firm like ours and they say, ‘well, let’s get in there seeing the books and records’ and you get some pushback from the company. And that’s when all the hairs in your neck stand up and you come to the Watkins firm and we file a motion.

And we discover through our due diligence that the company’s doing very good and that they also formed an offshore corporation of the same name. And they’ve taken all the assets and they’re all driving Rolls-Royces. So this has happened more times than I can say, because it just does happen. Nobody fights over anything unless there’s money involved. If it’s just doing okay, they would tell the truth and say, it’s all great. But if that big money offer comes in the door and they have a way of keeping it for themselves, it’s very tempting for human nature to turn that down.

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 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.

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 an uncle that forms a company and you start sending business that way, and before you know it, you’re 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 shareholders and the corporation and, breach of fiduciary duty.” – Dan Watkins, Founding Partner

If you are concerned about shareholder disputes in San Diego we invite you to review our podcast Episode 14 Shareholder 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.