It’s not uncommon for disputes to arise among members/shareholders/partners running a business - often concerning issues of management or the direction of the company. These disputes can become messy and interrupt internal operations or even threaten profitability and survival, especially if those disputes were not anticipated at the founding of the business.
Whether the founders established their business as a Limited Liability Company (LLC), a corporation, or a type of partnership, they should have included dispute resolution mechanisms and options in their governing documents - an LLC or operating agreement for an LLC, bylaws for a corporation, or a partnership agreement for a partnership.
If you are involved in a dispute within your fellow business owners in or around Birmingham, Alabama, or anywhere in Alabama or the Florida Panhandle, contact Clark Law Firm. Attorney John W. Clark IV is an experienced and knowledgeable business litigation attorney who can listen to your dispute, assess options for you, and then guide and represent you toward the best available outcome.
Partners in an LLC — referred to as members — often reach a point in the maturation of their business when they develop differing (or even opposing) visions of how the business should be run and what direction should be taken. Business can come to a standstill as they fight it out.
If disputes were anticipated and addressed in their operating agreement, then matters may be resolved by a simple vote or by another mechanism specified. If not, the members may end up fighting it out and never achieving a resolution. The only available resolution may be in court via litigation.
If the business is a corporation, then the owners/founders may be the officers or directors of the company, or they may just be shareholders with a majority interest. If internal disputes arise in a corporate structure, then it is the board of directors’ responsibility to resolve matters. But the directors’ roles and responsibilities must be clearly spelled out in the bylaws.
Some corporations neglect to issue bylaws or neglect to address dispute resolution if they do. If a dispute over internal management threatens operations and profitability, then the shareholders can demand action from the board. If matters are not resolved, shareholders may be able to file a derivative lawsuit to have a court address the issue.
An internal business dispute generally involves two or more persons with an ownership interest. Such disputes can arise in privately held companies and publicly traded companies.
We already mentioned disputes over direction and management style, but another common conflict involves accusations that one owner is not "pulling their weight" or is being overly compensated. Other issues that lead to disputes arise when there are income discrepancies, one owner siphons off profits or assets for personal gain, one owner wants out, or one owner is frozen out of operations by the others.
Other problems involve officers fighting over direction, potential breaches of fiduciary duty by officers or directors, or allegations of a conflict of interest. Breaches of contractual obligations also loom large.
In the absence of a resolution mechanism included in an operating agreement or corporate bylaws, the most common resolution options include:
Internal, direct discussions and negotiations
Arbitration (whether binding or not)
There are costs in terms of both time and money in each of these options. Internal negotiations may be cash-friendly but ultimately prove unable to resolve the issue. Mediation and arbitration will require the services of third-party providers, and litigation will often prove to be the costliest and lengthiest route to take.
Attorney John W. Clark IV of Clark Law Firm PC stands ready to evaluate the situation leading to your dispute, assess your options, and determine the best approach to resolving your internal management dispute. He will then work with you until matters have been resolved and your business can move forward smoothly once again.
If there is no current dispute, John can also help you put mechanisms in place to deter and facilitate the resolution of disputes in the future.
Don’t let a dispute over internal management stymie your business or threaten its viability. Contact Clark Law Firm PC if you’re anywhere in Alabama or the Florida Panhandle. John Clark has helped countless other businesses end their disputes, whether through negotiation, mediation, or litigation, and he stands ready to help.