Shareholder disputes: Practical tips to prepare shareholder agreements and company charters

July 14, 2020 Court Litigation

Preparing shareholder agreements and company charters – practical tips to prepare yourself for future shareholder disputes

It is common practice for business investors, when setting up a joint venture or following a M&A project, to seek protection of their investment via a shareholder agreement and company charter.

These documents are often designed with the intention to impose rules that the shareholders must follow and allow non-default shareholder(s) to sue for damages (or any other remedies available) if there is a breach. Nevertheless, filing a lawsuit or arbitration claim amid a shareholder dispute is the very last thing you want to do, regardless of how good your chances of winning are. Litigation proceedings will always be very time-consuming and, as the business will not be able to operate normally during the dispute, there is the potential that the company may collapse or be significantly damaged by the time the dispute is resolved. Thus, when drafting shareholder agreements and company charters, you must aim to minimize the possibility of such a situation from the outset, either by preventing the other side from breaching the agreement or ensuring that you still have enough control over the business to keep it running should a shareholder dispute arise. Below are some practical tips for ensuring the validity of these instruments and ensuring that your business operations remain uninterrupted.

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Authors: Stephen Le, Derek Phan 

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