Common Causes of Shareholder Disputes

Nowadays, it is common for businesses to be owned by multiple individuals or organizations through investments. Suppose you or your business partners have agreed to sell some shares to private individuals/organizations who may wish to invest in your business. In that case, it is crucial to have a shareholders’ agreement in place to make both parties aware of their rights and responsibilities. The agreement must also state how disputes will be handled, including how these disputes may be resolved. Legal consultants in Dubai can help you write or review a shareholders’ agreement to ensure that everything is clear for the parties involved before the contracts are signed.

What are the common causes of shareholder disputes?

When you have more people making decisions for a business, the decision-makers will inevitably have disagreements on how they must proceed. Here are some of the most common causes of shareholder disputes you need to know:

 

1. Breach of the shareholders’ agreement

Since the Shareholder Agreements is a contract for all parties involved in the business, any action that violates any of its terms is considered as a breach and may result in a contract dispute and sometimes litigation. Whether it’s a violation of the sale of restricted shares or failure to fulfill one’s responsibility as a shareholder, you may need to consult with a shareholder dispute lawyer to come up with a resolution that is fair for all parties.

 

2. Majority vs. Minority

Since they have more shares in the company, many shareholders get to vote on the big changes that will happen to the business. Minority shareholders are mostly at a disadvantage as they are often not included in decision-making or voting, even when they are mostly affected by the changes that will occur. Whether you’re a majority or minority shareholder, you may consult with the best lawyer in Dubai to help you have a better understanding of the terms in the agreement before signing it.

 

 

3. Managerial Issues

Managerial decisions are often one of the major causes of disagreement among shareholders, mostly because these decisions often affect the company’s direction. Any decision that may increase or decrease the value of the shareholders’ investments may lead to major disputes among the parties involved, especially when there is a conflict of interest. To avoid any negative impact due to these disagreements, companies should have a shareholder’s dispute resolution procedure. This way, it is easier to address everyone’s issues and differences.

If you need assistance in resolving shareholders’ disputes, Motei and Associates can provide you with the legal services you may need.

Difference Between Contract and Commercial Law

 The process of establishing a business can be stressful and time-consuming, especially when you're new to it or you're starting an international business. There is plenty of paperwork and procedures you need to accomplish before you can start operating. For this reason, several business owners choose to go to international law firms in Dubai to help them get started.

 

What is the difference between contract and commercial law?

Defining commercial law first will help in understanding contract law and how it can affect the way you do your business.

Commercial law is the general law that refers to any legislation which pertains to merchants who are exchanging goods and/or services, dealing with any transaction between a seller and a buyer. While this law has a wide scope, it mainly focuses on providing support for businesses, especially to protect all parties from unlawful trades.

Contract law on the other hand is a specific law that refers to rules or principles which regulates the enforcement or fulfilment of contracts/agreements between two or more parties who have entered a commercial relationship. It is one of the many laws that are under the umbrella of commercial law.

Under commercial law, contract law is any contract or agreement (formal/informal) entered upon by two parties during a business transaction. It may be applicable to businesses or entities that are buying or selling products and/or services. As you start your business, it would be helpful to have commercial law advisors to guide you in establishing different agreements or contracts between yourself and other parties you wish to do business with. It is beneficial in making sure that both parties are doing business that is compliant with the country's laws.

 

What impact do these laws have on your business?

Contract law has more impact on businesses since its focuses on business relationships between two or more parties that are formalized through contracts. It also increases the level of certainty in business relationships as it assures that both parties will be responsible for doing what was agreed upon in the contract.

Creating contracts between business partners is not an easy task. The ones making the contract should be familiar with not just existing laws, but also how your business model should work. Everything must be made clear in the contract to avoid any issues that may hurt the business in the future. Before signing or presenting a contract from/to another party, it’s best to seek the help of contract law attorneys to review the terms and make sure they are fair for both parties.

 

If you need help in making contracts or have further inquiries about commercial and contract law, Motei and Associates can provide you with the legal services you need.