Disagreements on business direction can quickly escalate in to full blown disputes between directors and shareholders. Our expert team can quickly help take the heat out of a difficult situation and ensure the business continues to thrive
When a company first starts out with a small number of business owners who are also directors then the enthusiasm of the parties coupled and the rose-tinted glasses around starting up a new business that they are passionate about unfortunately sometimes means that the business owners don’t set up enough precautions in the event of later disputes between the parties.
However, when the company is setting up, if some thought is given to the possibility that there might be a disagreement on business direction in the future, then some careful planning when setting up the company can prevent a lot of problems arising in the future, which can be extremely costly to resolve.
When can disputes arise?
In large companies, the disagreement on business direction is less likely, as there are inevitably many more checks and balances put in place around the board of directors to ensure that they are following a specific agreed strategy, and that the decisions they make are in line with that strategy.
In a small or medium size enterprise, often set up by two or more individuals, there is more scope for a divergence of ideas that can lead to falling out and disagreement on the direction the company should go.
How to prevent disputes / how to resolve disputes that arise?
One of the most effective ways to prevent a disagreement on business direction is for the business owners to be very clear on what the business direction is in the first place.
Most successful businesses have a
- business strategy, which can cover anywhere from one year to five years and so on. If the business owners can find common agreement on where they think the business should be heading, then there is less likely to be disagreement on day to day decision-making that will lead to a fall out between the shareholders and directors; and
- a well drafted shareholders agreement and a well drafted directors service level agreement – which can pre-empt a lot of future problems from occurring.
No matter how well planned a business is, inevitably there may be disagreement on business direction between shareholders and directors in the future that just can’t be foreseen or prevented. However, if the resolution of disputes is set out clearly in a shareholder agreements from the outset, then at least when these problems do arise, they can be dealt with smoothly.
At Francis Wilks & Jones we
- advise business owners on the benefits of a well drafted shareholders agreement, and directors service level agreement. Both of these can pre-empt disputes amongst shareholders and directors and the company, and can be extremely helpful in avoiding costly litigious disputes amongst business owners further down the line.
- can provide your company with dispute resolution prevention advice, at company set up or anytime during the life of the company as needed.
However, if you find yourself in a dispute with your business owners, we have many years of experience in dealing with and resolving shareholders’ disputes, including using settlement techniques such as mediation or alternative dispute resolution before having to resort to the court process. Contact one of our friendly team today to discuss your issues further.