Houston Shareholder & Partnership Dispute Lawyers
We Help Texas Businesses Resolve Disputes Between Shareholders & Partners
Sometimes, shareholder and partnership disputes arise from conflicts in personality, disagreements between majority and minority shareholders, violations of operating guidelines, breach of fiduciary duties or bad faith situations. If you are involved in any shareholder or partnership dispute, do not delay in contacting our business litigation firm.
You can count on the attorneys at Hendershot Cowart P.C. for in-depth analysis of your shareholder and partnership rights and all paths to resolution, including negotiation, mediation, arbitration, or the resolution of your case in court.
On This Page
- Types of Shareholder & Partnership Dispute Cases We Handle
- Settling Shareholder Disputes Over Buy-Sell Agreements
- Addressing Shareholder Disputes Over Distributions, Dividends & Compensation
- Bringing or Defending Shareholder Derivative Lawsuits & Individual Shareholder Claims
- Settling Minority Shareholder Disputes in Closely Held Businesses
- Your Options When a Business Partner Neglects Their Duties
- Why It's Important to Have Written Partnership & Shareholder Agreements
Types of Shareholder & Partnership Dispute Cases We Handle
Our shareholder and partnership dispute law firm has extensive experience successfully litigating all types of complex disputes. We advise, represent and provide legal counsel in the following areas:
- Fraudulent transfers
- Shareholder buyout agreements / partnership buyout agreements
- Minority owner rights, including freeze-outs, squeeze-outs and lockouts
- Obstructed access to books and records
- Breach of fiduciary duty
- Disputes over funding of business operations
- Business asset misuse or embezzlement
- Disputes over distributions, dividends and compensation
- Deadlock among board members and shareholders
- Breach of contract
- Shareholder disputes
- Intellectual property disputes, including theft of trade secrets
- Violations of confidentiality agreements
- Violations of non-compete agreements
- Violations of non-solicitation agreements
- Hostile takeovers/buy-outs
- Dissolution of the business
- Business owner disputes
Settling Shareholder Disputes Over Buy-Sell Agreements
In general, a buy-sell agreement provides for the future sale of owners' interests if some specified event happens, such as death, disability, retirement or termination. Generally, a buyout agreement determines who can buy a shareholder's stock, whether the company must buy out the shareholder, how to measure the value of a shareholder's interest, and payment terms for a buyout.
Sometimes, however, these agreements can cause conflict.
We aggressively address common buy-sell conditions and potential areas of conflict including:
- Events that trigger a buy-sell: In some cases, business partners are in agreement that one partner should leave the business. But in others, disputes arise over whether a partner can be forced to buy or sell under the agreement.
- Inequitable buy-sell agreements. Disputes may arise when the provisions of a buyout agreement lead to unfair results. We also handle buyout agreements with noncompetition and nonsolicitation covenants.
- Valuations of property. The valuation of business assets, including good will and Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA), is at issue in many buy-sell agreements. We negotiate and litigate valuation disputes, including complex disputes.
- Divorce of a Shareholder: Upon the divorce of a shareholder, it is possible for a court to award shares of stock to the non-shareholder spouse. We can negotiate and draft a shareholder agreement that provides terms and procedures for the divorcing shareholder to have first right to purchase the former spouse’s shares and remaining shareholders with options to purchase them if the divorcing spouse doesn’t.
Addressing Shareholder Disputes Over Distributions, Dividends & Compensation
Shareholders have a right to a proportionate share of the profits when the directors of the corporation distribute company profits and dividends. Our business law firm can protect your rights in disputes over dividends, compensation and distributions that arise in many situations, including:
- Shareholder disputes regarding when and how to issue dividends and compensation
- Failure to pay dividends or distributions
- Disputes over compensation packages for executives
- Problems that arise due to inadequate stock and dividend policies
Bringing or Defending Shareholder Derivative Lawsuits & Individual Shareholder Claims
Shareholder derivative lawsuits are claims shareholders bring on behalf of a company, and they can be a powerful tool for fighting corporate misconduct, ensuring accountability, or bringing action against third parties who may have contributed to their losses. Derivative suits are typically brought when corporations are unable or unwilling to bring valid lawsuits, such as claims against directors or officers who breach their fiduciary duty and are unlikely to bring claims against themselves for misconduct such as self-dealing, misrepresentation, and corporate waste. They can also be the foundation of litigating shareholder disputes involving oppression, as many procedural requirements for most corporate owners are waived for those in closely held corporations.
Aside from shareholder derivative suits, which are brought on behalf of the corporation and all of its shareholders, individual shareholders can also bring direct shareholder claims to enforce legal obligations they are owed by corporations, including directors and officers. They may be used to address individual losses resulting from the corporation’s misconduct, and when asserting direct claims to fight shareholder oppression.
Settling Minority Shareholder Disputes in Closely Held Businesses
Closely held corporations create substantial risks when it comes to minority shareholders and their vulnerable ownership interest, including risks of shareholder oppression or “squeeze-outs” and “freeze-outs.” In Texas, the landmark ruling Ritchie v. Rupe, which struck down shareholder oppression as a cause for legal action, has made shareholder litigation involving closely held businesses a relative new frontier. However, minority shareholders still have rights to hold majority shareholders accountable and pursue legal remedy based on other causes of action.
Shareholder remedies for oppression include:
- A court-appointed rehabilitative receiver: In some cases, the court can appoint a third party to manage the business, known as the rehabilitative receiver. This person can effectively put an end to shareholder oppression by preventing or stopping the majority shareholder from abusing his or her power.
- Filing a breach of fiduciary duty claim
- Obtaining an injunction
- Filing for breach of contract
- Enforcing your right to inspect the books and records
Your Options When a Business Partner Neglects Their Duties
This kind of complication may arise late in the life of a business, when one partner is ready to retire in one sense or another. One colleague may decide to neglect their responsibilities and assume they will be financially stable because they are a partner in the business, while leaving the other associate to pick up the slack.
If you are put in a position where you have to compensate for a partner ignoring their duties, you have various ways to handle the situation based on:
- How your business was established? Do you have written agreements in place? If so, how detailed are they? If you have a written partnership or shareholder agreement in place, does it include dispute or buyout resolutions?Although no one anticipates their business partner taking a back seat and burdening the others with all of the responsibilities, partnership or shareholder agreements that outline what happens in these situations can resolve the dispute faster and more easily.
- Controlling and minority shareholders: Which is the partner in question? Options for how to handle a partner not doing their part will depend on whether they are a controlling shareholder or a minority shareholder.
If you find yourself taking on a fellow shareholder's obligations, contact the business attorneys of Hendershot Cowart P.C. today to explore your options.
Why It's Important to Have Written Partnership & Shareholder Agreements
Regardless of your position as a majority or minority shareholder, one of the most important things to have is a written shareholder agreement that is as detailed as possible. Bracing for situations – even those that seem unlikely – will help all parties be better prepared for the future. When partnerships and shareholder rights are properly recorded, conflict can often be contained and resolved effectively to prevent business disruptions, lost value, and above all, litigation.
At Hendershot Cowart P.C., our experienced business partnership attorneys have been drafting partnership and shareholder agreements for over 30 years.
We draft shareholder and partnership agreements that address:
- Shareholder responsibilities and authority and the rights of shareholders in making business decisions;
- Partnership buyouts or transfer of ownership, including the process for the removal or replacement of company officers;
- Voting rules for decision-making;
- Methods for evaluating, preventing, and resolving disputes;
- Options for the removal of potentially harmful shareholders; and more.
Know where you stand in any business, partner, or shareholder dispute. We handle cases throughout the state, so contact our partnership dispute lawyers today to discuss your case. Reach us at 713-783-3110 or send us a message online.
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