A helping hand to resolve shareholder disputes
It was sadly inevitable that the Covid pandemic would push the UK economy into a recession. Unfortunately, the money worries that result from a recession can and often do affect relationships, whether they be personal or business relations.
Even the strongest of relationships have been known to breakdown when finances are tight and the current situation may well have caused the most severe financial pressures that some business owners have ever experienced.
And what if your relationship with your business partner was not a strong one to begin with? Perhaps you were secretly seething because you didn’t feel your fellow shareholder worked as hard as you or the disparity in earnings between shareholders got on your nerves but you were willing to ignore those feelings when the business was moving in a positive direction; sales were increasing and the business was growing. But now times are bad, the business is performing poorly and cash is tighter, these differences may be magnified and this may start to cause a strain on your relationship with your fellow shareholders. Often once these feelings of resentment bubble to the surface a dispute is unavoidable. The focus of the owners can then shift from developing the business as they are consumed with the dispute and the business suffers.
Resolving a shareholder dispute can be tricky. Like a divorce, emotions often run high and it can be hard to strip feelings away and adopt a rational approach to resolving matters.
When a dispute arises in a family owned business it can often be particularly toxic as both business and personal relationships are challenged and the shareholders are even more likely to be driven by emotion. The long running dispute between the Barclay family in relation to the Ritz is an excellent example of how things can go badly wrong.
Resolving a dispute
When relations break down, it often helps to introduce a professional to assist the parties resolve the dispute. It may be that the relationship has irretrievably broken down and the only resolution is the parties parting. Once you have reached this point there are some tough decisions to make such as:
- Should I stay or should I go?
You need to be honest with yourself and understand if you are capable of running the business without your partner. Do you have the relationships with the staff, customers and suppliers? Can you replace your partner’s skills easily? Answering these questions will help you decide whether you should offer to buy out the other shareholder or try and get him to buy your shares.
- Whether you are buying or selling – how much are the shares worth?
Often the party buying the shares believes the company is worth much less than the party selling their shareholding, but it is important to be realistic about the value. Professional advisers can help you agree a fair price and can advise you on what should be considered when valuing the shares.
We have extensive experience of advising shareholders and helping them resolve disputes which is why we have launched a dedicated website – www.shareholderdispute.uk – focusing on shareholders relationships which will help you identify if a problem is on the horizon and offer practical, objective advice on how to avoid disputes arising or, where they do, how to resolve them.
The website guides you through the options open to you and the potential route to getting the dispute resolved.
It is important that you seek early advice if you think your relationship with your business partner is breaking down. Please do get in touch if you want to chat through your situation.
Contact Andrew Koffman for more information.