Shareholder Dividend or Partnership Distribution Disputes

What are shareholder dividend or partnership distribution disputes?

Shareholder dividend or partnership distribution disputes occur when one shareholder or partner believes they are entitled to a more significant share of the profits than the others or when there is a dispute over how profits should distribute among the shareholders or partners. For example, shareholders may disagree on whether profits should be reinvested in the business or distributed as dividends to the shareholders.

These types of disputes can be complex and can significantly impact the business or partnership. Therefore, it is essential for shareholders or partners to have clear agreements regarding the allocation and distribution of profits and to have a process for resolving disputes. This clarity can help to minimize the risk of conflicts (and derivative litigation) and ensure that the business or partnership operates smoothly.

Need help with a matter related to shareholder dividend or partnership distribution disputes? Schedule your consultation today with a top shareholder disputes and derivative litigation attorney.

Which laws and regulations apply to shareholder dividend or partnership distribution disputes in Florida?

In Florida, shareholder dividend or partnership distribution disputes are typically governed by the laws and regulations outlined in the Florida Business Corporation Act and the Florida Revised Uniform Partnership Act (FRUPA), depending on the type of business entity involved:

The FBCA provides rules and guidelines for the operation and management of Florida corporations, including provisions related to shareholder rights and the distribution of dividends. For example, § 607.06401 of the FBCA sets forth the requirements for the payment of dividends, including the requirement that dividends must pay out of the corporation’s surplus and that dividends may not pay out if the corporation is insolvent.

Similarly, the FRUPA provides rules and guidelines for the operation and management of Florida partnerships, including provisions related to partner rights and the distribution of profits. For example, § 620.1503 of the FRUPA sets forth the requirements for the distribution of profits, including the requirement that profits must distribute per the partnership agreement or, if there is no agreement, in proportion to the partners’ contributions to the partnership.

In addition to these statutory provisions, shareholder dividend or partnership distribution disputes also involve the terms of the business’s governing documents, such as the corporation’s articles of incorporation or the partnership agreement. Therefore, if a dispute arises, it is essential to consult with an experienced business attorney who can advise on the applicable laws and regulations and help to resolve the dispute in the most effective manner possible.

What are common shareholder dividend or partnership distribution disputes that lead to litigation?

Some common types of shareholder dividend or partnership distribution disputes that may lead to litigation include:

• Profit Allocation: Shareholders or partners may disagree over how profits should be allocated or distributed among them. For example, one shareholder may believe they are entitled to a larger share of the profits based on their contributions to the business, while others may disagree.
• Dividend payments: Shareholders may differ over whether the business should pay dividends and how it should pay out. For example, one shareholder may believe that the company should reinvest all profits, while others may want to receive dividends.
• Profit Calculation: Shareholders or partners may also disagree over the methodology for profit calculation. For example, shareholders or partners may differ over how to allocate expenses or whether certain costs should factor into the computation of profits.
• Breach of fiduciary duties: Shareholders or partners may allege that another shareholder or partner breached their fiduciary duties by taking actions that were not in the business’s best interests or by failing to fulfill their obligations to the business.
• Mismanagement of the business: If the business is struggling in its overall direction, shareholders or partners may allege that the business was mismanaged, usually stemming from a decrease in profits or a failure to distribute profits appropriately.

When a set of facts is appropriate to give rise to problems with shareholder dividend or partnership distribution disputes, there are many paths a claimant may take. We are value-based attorneys at Jimerson Birr, which means we look at each action with our clients from the point of view of costs and benefits while reducing liability. Then, based on our client’s objectives, we chart a path forward to seek appropriate remedies.

To determine whether your unique situation may necessitate litigation, please contact our office to set up your initial consultation.

What evidence does a plaintiff generally need to successfully file a lawsuit regarding shareholder dividend or partnership distribution disputes, and what are common legal defenses to those claims?

To successfully file a lawsuit regarding shareholder dividend or partnership distribution disputes, a plaintiff generally needs to provide evidence that:

• There is a valid agreement in place that governs the allocation or distribution of profits or dividends;
• The defendant violated the terms of the agreement by failing to allocate or distribute profits or dividends per the agreement; and
• The plaintiff suffered damages due to the defendant’s breach of the agreement.

Some common defenses that defendants may use to claims of shareholder dividend or partnership distribution include:

• Lack of a valid agreement: The defendant may argue that no valid agreement governs the allocation or distribution of profits or dividends or that the agreement is ambiguous or unenforceable.
• Compliance with the agreement: The defendant may argue that they have complied with the terms of the agreement and have not breached any obligations to the plaintiff.
• Business judgment rule: The business judgment rule may be used as a defense if the defendant can demonstrate that they made a reasonable business decision regarding the allocation or distribution of profits or dividends based on the information available.
• Statute of limitations: The defendant may argue that the plaintiff’s claim is barred by the statute of limitations, limiting the time a plaintiff has to file a lawsuit.
• Failure to mitigate damages: The defendant may argue that the plaintiff failed to mitigate their damages by not taking reasonable steps to minimize their losses.

To see what actions or defenses may be available for your unique situation, please contact our office to set up your initial consultation.

Frequently Asked Questions

1. What is a shareholder dividend?

A shareholder dividend is a distribution of profits a corporation pays its shareholders.

2. What is a partnership distribution?

A partnership distribution is a distribution of profits that a partnership pays its partners.

3. How are dividends and distributions calculated?

The amount of dividends or distributions is typically calculated based on the profits of the business, which result from subtracting the business’s expenses from its revenues.

4. Can a business prevent a shareholder or partner from receiving distributions or distributions?

In some cases, a business may be able to prevent a shareholder or partner from receiving dividends or distributions if there are legal or contractual grounds for doing so, such as if the shareholder or partner breached the governing documents or engaged in misconduct.

Have more questions about a shareholder dividend or partnership distribution dispute-related situation?

Crucially, this overview of shareholder dividend or partnership distribution disputes does not begin to cover all the laws implicated by this issue or the factors that may compel the application of such laws. Every case is unique, and the laws can produce different outcomes depending on the individual circumstances.

Jimerson Birr attorneys guide our clients to help make informed decisions while ensuring their rights are respected and protected. Our lawyers are highly trained and experienced in the nuances of the law, so they can accurately interpret statutes and case law and holistically prepare individuals or companies for their legal endeavors. Through this intense personal investment and advocacy, our lawyers will help resolve the issue’s complicated legal problems efficiently and effectively.

Having a Jimerson Birr attorney on your side means securing a team of seasoned, multi-dimensional, cross-functional legal professionals. Whether it is a transaction, an operational issue, a regulatory challenge, or a contested legal predicament that may require court intervention, we remain a tireless advocate every step of the way. Being a value-added law firm means putting the client at the forefront of everything we do. We use our experience to help our clients navigate even the most complex problems and come out the other side triumphant.

If you want to understand your case, the merits of your claim or defense, potential monetary awards, or the amount of exposure you face, you should speak with a qualified Jimerson Birr lawyer. Our experienced team of attorneys is here to help. Call Jimerson Birr at (904) 389-0050 or use the contact form to schedule a consultation.