Avoiding Shareholder Litigation

Avoiding Shareholder Litigation

Here are a few strategies that we have employed to deal with shareholder disputes:

Assert Inspection Rights. This can result in some surprising revelations which, in turn, may lead to interesting results.

Expand Board of Directors. Expanding a company's Board of Directors can avoid and/or eliminate a deadlock. It may also bring in a fresh point of view.

Purchase Control. If the shareholders each own an equal number of shares one shareholder may wish to consider paying a premium to buy a controlling interest in the company.

Seek Appointment of Provisional Director. If the corporation has an even number of directors and the board is deadlocked, any director or holder of at least 1/3 of the voting shares can petition a court to appoint a provisional director to break the deadlock. If the corporation has an uneven number of directors and the shareholders are deadlocked, any shareholder of at least ½ of the voting shares can petition a court to appoint a provisional director under certain circumstances.

File for Bankruptcy Reorganization. Under certain circumstances, a Chapter 11 bankruptcy reorganization can result in one shareholder, or a group of shareholders, gaining control of the corporation.

Sell Company to Third Party. If the shareholders are unable to continue in business together, the shareholders may wish to consider selling the company to a third party.

These are just a few of the possible approaches that may be considered when faced with shareholder disputes in California. If you are dealing with a problem of this sort, we would be pleased to provide a first consultation at no charge.