When shareholder disagreements escalate in corporations, litigation may become unavoidable. Preparing for potential litigation is not just prudent for corporation owners – it’s essential for the company’s survival.
The Mississippi Business Corporation Act governs many aspects of corporate law, including shareholder disputes. While this act provides a framework for resolving conflicts, legal action may be necessary when other methods fail.
Common reasons shareholders pursue legal action include:
- Disagreements over company direction
- Conflicts about dividend distribution
- Allegations of mismanagement
- Breaches of shareholder agreements
- Disputes over voting rights
These legal battles can threaten your company’s stability, resulting in productivity losses and strained relationships that may jeopardize the company’s existence. Understanding the litigation process is crucial for protecting your interests.
The litigation process
A shareholder lawsuit typically involves:
- Filing a complaint with the court
- Serving the complaint to the opposing party
- Conducting the discovery phase, where both sides gather evidence
- Engaging in pretrial motions and hearings
- Proceeding to trial if the case isn’t settled beforehand
- Pursuing potential appeals
While time-consuming and costly, litigation may sometimes be the only way to resolve deep-seated conflicts.
Strategies to employ once litigation has begun
When facing shareholder litigation, act swiftly and strategically. Consider strategies such as:
- Preserving all relevant documents: Implement a companywide document retention policy.
- Maintaining business continuity: Assign a dedicated team to handle litigation matters, allowing others to concentrate on running the business.
- Exploring settlement options: Remain open to mediation or arbitration for faster, less costly resolutions.
- Managing communication and public relations: Develop a clear message for stakeholders and employees about the litigation. Limit discussions to those who need to know.
Your ability to handle shareholder disputes can significantly impact your corporation’s future. Stay proactive, stay informed and consult a business litigation attorney when needed. Your company’s success may depend on these strategic decisions.