5 Tips for Navigating Corporate Disputes

Navigating corporate disputes can feel like walking through a minefield. One misstep can result in costly and time-consuming legal battles that jeopardize relationships and the business. These five tips below can help you manage corporate disputes effectively without resorting to litigation.

Tip #1: Know Your Governing Documents

Knowledge is power during a corporate dispute. Understanding the details of all corporate governing documents will allow you to understand what needs to be done and how. The key documents you will need to review vary depending upon your type of entity: shareholder agreements and bylaws for corporations, operating agreements for limited liability companies, and partnership agreements for partnerships. And don’t forget about possible resolutions, written consent, and meeting minutes floating out there, which could effect the rules of the game as well.

If your entity does not have these governing documents, you’ll need to look at the applicable Florida statutory rules that will apply the default set of operating rules. Being familiar with the governing corporate documents and/or statutes will allow you to develop a strategy for continuing company operations despite having disruptive or uncooperative business partners.

Tip #2:  Follow the Rules

Strictly following the terms and procedures included in your governing documents and applicable laws can create the upper hand during corporate disputes. The terms of your governing documents will provide the operating manual for all company actions and adhering to these requirements can ensure that your actions are binding upon the company or trigger other avenues to resolve the dispute. If the governing documents mandate certain meetings for company actions, it’s crucial to conduct these meetings in strict compliance with the rules, and to perform any other actions that may need to occur prior to, during, or after the meeting, such as delivering notices, passing resolutions, and naming a presiding party in charge. Following the rules not only can facilitate discussions between the parties but also improve your positioning during any future legal proceedings.

Tip #3: Call out Misconduct

Promptly and directly addressing misconduct by business partners, and documenting same for the record, can be a powerful tool in resolving corporate disputes. If you encounter behavior from your business partner that is contrary to the terms of your corporate governing documents, it’s important to confront them with their transgressions and cite your authority. You should also document all instances of your business partner’s misconduct and follow the prescribed procedures in your governing documents for reporting and addressing these issues. Confronting business partners with acts of misconduct not only upholds the integrity of the company’s governing documents, but also deters future misconduct and avoids potential waiver or course of conduct modifications to your existing terms.

Tip #4: Consider Buyouts

In situations where corporate disputes are irreconcilable, a buyout can be a practical solution for all parties. When disputes have arisen between shareholders or partners, proposing a buyout can provide a peaceful exit strategy that benefits everyone. It’s important to ensure that the buyout negotiations are fair, transparent, and in compliance with the governing documents. Buyouts are more cost-effective and less disruptive than litigation and can allow for the business to continue operations without ongoing conflict.

Tip #5: Take the High-Road

Throughout any corporate dispute, maintaining professionalism and ethical conduct is paramount. Avoid engaging in personal attacks or public disputes that could damage the reputation of the company or expedite litigation. Taking the high road not only preserves business relationships but also positions you favorably in the eyes of employees, customers, and potentially, the legal system.

Conclusion

Effectively navigating corporate disputes without litigation involves a blend of knowledge, adherence to rules, and consideration of practical problems and solutions. Understanding and utilizing your governing documents will be your best avenue to operate the company effectively during a corporate dispute and will often facilitate a practical and amicable solutions between the parties. If you are currently navigating a corporate dispute, our experience attorneys at Jimerson Birr can help. Connect with us today.