Partnership and shareholder disputes happen for a variety of reasons. One of the primary reasons that partnership and shareholder disputes occur is poorly written partnership and shareholder agreements. When parties fail to effectively define their expectations by way of a shareholder or partnership agreement, this opens the door for disputes regarding issues like ownership percentages, distributions, compensation, and more. Below is some information on how to draft partnership and shareholder agreement to avoid disputes.
Partnership and Shareholder Agreements
By executing a strong partnership or shareholder agreement, it’s possible to anticipate and prevent many partnership and shareholder disputes before they arise. In addition, a well-drafted agreement can be worth its weight in gold if a legal dispute does arise. Although the content of partnership and shareholder agreements can vary greatly, there are several issues both types of agreements should address, including:
Contributions: Partnership and shareholder agreements should define the required contributions of partners and shareholders. Contributions may include money, effort, time, customers, and anything else that is required to run the business.
Distributions: Partnership and shareholder agreements should detail the distribution of profits and salaries.
Ownership: Partnership and shareholder agreements should address whether ownership of assets will be in the name of the business or the individual shareholders or partners.
Death: Partnership and shareholder agreements should also address the way in which ownership interests will be handled in the event of a shareholder or partner’s sickness, death, retirement, or similar event.
Decisions: Partnership and shareholder agreements should identify the partners or shareholders who are tasked with making day-to-day management and long-term decisions.
Disputes: Disputes between partners or shareholders sometimes happen. Therefore, a shareholder or partnership agreement should address how disputes will be resolved.
Special circumstances: Finally, partnership and shareholder agreements should anticipate and address special circumstances that may occur in the future, such as retirement, buyouts, and any other circumstance that may have a significant effect on the business.
When Partnership and Shareholder Disputes Arise
Disputes inevitably arise in all businesses. Usually, partnership and shareholder disputes can be resolved without going to court. However, even with a strong agreement, partnership and shareholder disputes sometimes result in litigation. And when this occurs, it is highly recommended that a New Jersey commercial litigation attorney be contacted as soon as possible.
Contact Our New Jersey Commercial Litigation Attorney
Whether you are involved in a business dispute or want to lower your business’s litigation risk exposure, you need an experienced New Jersey commercial litigation attorney on your side. At Rosenblatt Law, our experienced commercial litigation attorneys can help you mitigate your risk of litigation by developing an effective business risk management strategy. However, if a dispute does arise, we are highly experienced at negotiating and litigating successful outcomes. Therefore, if you need legal assistance in New Jersey, please contact us today to schedule a consultation.
