Knowledgeable California Business Law Attorneys

While disagreements can arise in all types of contexts, disputes between owners or founders of a company are particularly common when dealing with small businesses, partnerships, or closely held corporations. Partners who initially agreed on all aspects of starting a company may find that their views begin to differ, or their approaches to growing the business are entirely different.

Because of the emotional and financial investment that goes into starting a business, ownership disputes can be fraught with tension and personal affronts.

Types of Ownership Disputes That Can Arise in Rancho Cucamonga

Ownership issues can arise in all different types of contexts. A common cause is when one owner feels that another has breached some sort of contract or agreement. However, there can also be more complicated issues of corporate governance and breach of fiduciary duties involved.

Owners and shareholders can owe duties to each other and to their company to act in the best interests of the corporation that they formed. Disputes often arise when one owner feels that another is no longer operating in that best interest.

For example, one owner may allege that the other is engaging in self-dealing, or orchestrating certain contracts and projects within the company that are particularly beneficial for that owner rather than for the company as a whole. Where personal gain begins to outweigh the commitment to the business, tensions often arise.

Similarly, disputes can occur where one owner feels that the other owner is excluding him from participation in important decisions within the company, or keeping him out of loop on the company’s path moving forward. This is often known as a “freeze-out” and can be the basis for possible legal claims.

Disputes can also occur between shareholders. A similar claim can arise from a minority shareholder that he or she is being “oppressed” by the majority shareholder, and is not getting to participate fully and fairly in the decisions of the company.

Can You Prevent Owner Disputes from Proceeding to Litigation?

While disagreements and arguments between owners are one thing, actual civil litigation is a much more aggressive step. For many companies, the financial prospect of litigation can threaten the financial future of the company and hinder any progress that is being made.

For companies hoping to avoid this path, an initial step is to fully and fairly investigate the claims underlying an ownership dispute. If a company has independent officers or shareholders who can impartially conduct an investigation into what is going on – including whether issues such as self-dealing or oppression have occurred – this can allow the company to informally resolve the dispute and avoid the courtroom.

In some smaller companies where the owners are the primary employees, this may not be possible. The only way to have such an investigation would be if the parties to the dispute are willing to engage an outside investigator or mediator to evaluate the claims at issue, and make recommendations about how to move forward.

In the event that litigation is inevitable, owners may wish to consider whether their claims can best be resolved through an alternative dispute resolution process such as arbitration or mediation. This can help to keep costs down and avoid the raw emotion and “scorched earth” approaches that often arise in litigation.

California Attorneys Working to Keep Your Business on Track

If not handled swiftly and carefully, owner disputes can derail and destroy small, closely-held companies. For this reason they require careful attention and prompt resolution. At CKB Vienna, LLP, our business litigation attorneys understand the personal and emotional complexities of ownership disputes and can work with you to safely navigate these difficult waters. For more information, contact us online or at (909) 980-1040.

Comment