Shareholder and Directors' Disputes

People regularly enter into business by starting a company and becoming a company director. They may do so at the recommendation of another person, without fully understanding their rights and obligations. Being a company director typically has high expectations that “everything will be fine” associated with it – otherwise, why do it? Unfortunately, as a result of poor choices, or an unfortunate turn of events, serious disputes often arise between directors and/or shareholders.

 

Over the past fifteen years, there have been significant increases in corporate complexity. Previously, companies were typically owned by a few people directly; now, it is more common to have a company, possible service/asset owning entities, and related family and discretionary trusts.

 

Company disputes typically arise as a result of one of the following three situations:

1. Business starts declining (“times get tough”);

2. Business starts improving dramatically; or

3. Change in family/personal situation for some or all parties.

Regardless of whether or not you personally invested money or assets in the business, as a company director you have rights that need to be protected if you are unable to continue working with the person or people with whom you started business. Equally, you may also owe duties and face potential liabilities, even though you believed you were acting appropriately.

 

When disputes become apparent, you need to think about:

• What are my liabilities?
• How can you retrieve the money you put into the company?
• What are your rights and liabilities under a corporate constitution, shareholders agreement, or trust deed, and pursuant to the Corporations Act 2001 and other legislation?
• Must the company continue, or is there a better way of continuing the business?
• How can the assets be split?
• Can you resolve any dispute with other directors, or is it best to part company with them? How can this be done?

The outcomes of poor choices or an unfortunate turn of events can be mitigated; our team of experienced lawyers can assist you in achieving the best possible outcome in this specialist area of the law by using alternative dispute resolution, or the court, and obtaining expert valuations as appropriate to your dispute.

Contact Quinn & Scattini to obtain legal advice on how to best resolve the dispute (through litigation or otherwise, if possible) to allow you to continue with your business.