Shareholder Disputes
Shareholder disputes and partnership disputes often include complex financial issues combined with high emotions and complicated legal issues.
We have been engaged by minority owners, majority owners, or the company itself, to provide a deep understanding financial issues of the business and help attorneys interpret the valuation or buy/sell provisions of their shareholder, operating, or partnership agreement.
Common issues arising in shareholder disputes include:
Breach of fiduciary duty
Minority oppression
Misuse of company assets
Executive compensation
Ambiguous buyout agreements
Self-dealing
Corporate stalemate
Cogence Group plays a helpful (or critical) role in providing clarity to financial issues through independent and professional opinion.
Shareholder disagreements can be resolved through mediation, arbitration, and trial. We have experience in all these arenas.
In a recent shareholder dispute, there was a complete stalemate between two family branches of a three-generation family corporation as to the future direction of a business. One family wanted to liquidate the company’s assets amid worsening operating losses. They wanted to cash out while the business still had assets. The other family wanted to keep the business operating because of the importance of the business’s legacy and impact it had in the community. We provided expert testimony regarding our interpretation of the voting section of the operating agreement and testimony regarding whether the sale of some of the company’s assets would constitute a liquidation of the business. As a result of our testimony, the company was able to sell its operating assets to a large competitor, keeping its important presence and keeping jobs within the community. The shareholders retained the real estate for future sale and development.
In another matter, a minority owner that had been uninvolved in the business for 20 years made a claim of shareholder oppression and demanded to be bought out. Cogence Group provided testimony regarding the claims of oppression to support the compensation of the managing owner and affirm that business transactions appeared to be transacted at fair market value, without any self dealing. As a result, the claims of oppression were denied, and the buyout proceeded with appropriate discounts applied to the minority interest.
If you are involved in a shareholder dispute, Cogence Group can help across the wide range of issues involved. As forensic accountants and valuation experts, we are uniquely qualified to assist through the winding path of resolution.