ARTICLES

Shareholder Agreements and Disputes

A shareholder is an individual or company that legally owns one or more shares of stock in a company. Companies draft shareholder agreements to define and regulate the shareholder’s role within the company and to provide policies for future purchase and selling of stocks. These agreements are usually governed by the basic, constitutional documents of the company; however, they are often mediated by other influences, such as share valuation formulas, which may become out of date and create issues down the line.

If a shareholder wishes to buyout their partner, thereby gaining more control and ownership of the company, an outdated valuation formula may inaccurately calculate their partner’s stock value, forcing them to pay a higher amount than the actual worth of the stocks. Similarly, if a shareholder wants to sell their stocks, the formula could undervalue their holdings, making their exit from the company much less profitable than originally imagined. Shareholder agreements are also susceptible to other risks. If the company’s constitutional documents are somehow inconsistent with the shareholder agreement, the intended arrangement outlined for the shareholders may be in jeopardy. Additionally, in certain countries, the use of a shareholder agreement constitutes partnership in the company, which can change the tax status of the company, often in an unfavorable way.

If you are currently having shareholder agreement or dispute issue, contact the attorneys at Skjold ▪ Barthel today for assistance with your issue.