Bennett & Philp Director Andrew Lambros and Senior Associate Spencer Slasberg have prepared a detailed guide on how to deal with, and manage, director and shareholder disputes in small companies with a limited number of shareholders.
Director and shareholder disputes, of course, can occur in companies of all sizes, however, one of the major differences when dealing with small companies is that, as a general rule, the directors and shareholders will effectively be the same.
Often the parties will have a significant financial interest in the company, which will be the major personal asset of the shareholders and directors as well as their major source of income. On top of this, when the roles are not properly defined, or the time invested is different, people inevitably value their contribution higher than any other party will. This "sweat equity" is always hard to put a figure on.
Addressing issues of conflict and dispute in small companies without affecting business
Small business ventures are a terrific vehicle for innovation and the pursuit of individual goals and plans. Sometimes a number of individuals share the same focus and goals and utilise small corporate structures to formalise that shared vision and unify individuals in a clean and formalised structure.
However, in our experience, the business judgement and common sense that would routinely be applied by directors/shareholders in every other facet of running their business often goes completely out the window when a dispute has arisen. Getting the parties to focus on a commercially sensible outcome is often the most difficult part of these disputes.
By understanding everyone's expectations early and being honest about how you value your roles and contributions, you can avoid disagreements and resentment down the track.
What's inside the Guide?
The paper provides a practical review of the common types of disagreements, the important initial considerations to pay attention to and how to achieve the best outcomes in each of these types of disputes.
- Types of disputes
- Possible resolution options
- Types of business and company structures
- Dispute prevention
- Conflict management
- Applications to the Court including the risks involved
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.