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Resolving shareholder disputes for New Jersey businesses

On Behalf of | Jun 14, 2023 | Commercial Law and Litigation

Shareholder disputes are inevitable in the life of many businesses. In New Jersey, where entities range from small startups to Fortune 500 companies, these disagreements can have significant impacts on operations. Understanding how to effectively handle shareholder disagreements is crucial to maintain business continuity and profitability.

As an intricate part of corporate governance, resolving shareholder disputes requires knowledge and planning. Consider these strategies to provide a roadmap for encountering these hurdles.

Implementing proactive measures

Proactive measures refer to steps taken before any disputes arise. This often means establishing clear corporate bylaws and shareholder agreements. These documents outline the rights and obligations of shareholders, the decision-making process and the procedures for resolving disputes. When thoughtfully crafted, these documents can prevent many disputes from emerging in the first place.

Employing mediation

If disputes arise despite having proactive measures in place, businesses should consider mediation as their first line of response. Mediation involves bringing in a neutral third party, known as a mediator, to facilitate dialogue and negotiations. This process aims to resolve disputes amicably and maintain working relationships among the shareholders. It is a private and confidential process, often preferred because it minimizes publicity and protects the reputation of the business.

According to the New Jersey Association of Professional Mediators, mediation can help when both parties want specific interests met and are looking for privacy in the resolution of the dispute.

Resorting to judicial intervention

When other means fail, New Jersey businesses might need to resort to judicial intervention to resolve shareholder disputes. Judicial intervention can take the form of a trial or arbitration, depending on the stipulations in the shareholder agreement. While this method might be more time-consuming and expensive, it provides a definitive resolution to the dispute, enforced by law.

By understanding and using these strategies effectively, businesses can manage shareholder disputes efficiently, minimizing disruption to business operations and maintaining a positive working environment. Thus, these methods serve as a valuable toolkit for New Jersey businesses to successfully navigate the complexities of shareholder disputes.

Source: Business, Commercial and General Civil Mediation – NJAPM. (n.d.). https://njapm.org/page/business-commercial-and-general-civil-mediation