15 Sep Consequences Of Breach Of Shareholders Agreement
Nevertheless, when faced with a violation of the shareholders` agreement, shareholders must act immediately to resolve the situation. If shareholder disputes are not resolved quickly and effectively, they can damage relationships and harm the future of the company. A more consensual way to solve the problem is a settlement agreement between shareholders. Shareholders may enter into a written agreement that would be strictly applicable to the injuring shareholder. Therefore, non-injuring shareholders, under the direction of an experienced lawyer, can negotiate with the hurting shareholder an agreement that would determine a fair and equitable solution. While these acts are sometimes considered valid, other shareholders, if they are able to prove that the action caused them a loss, may invoke an offence against the instigator of the hurtful act. One of the most common ways to demonstrate that an act caused a loss to a shareholder is to assert that it caused a depreciation of the shareholders` shares. In this case, several measures may be taken if the measure is contrary to the agreement, including the suspension of the shareholders` contrary voting rights or the recovery of damages of money for the injured party or injured parties. In extreme cases, this can even give rise to a court injunction, forcing the abusive shareholder to take a measure such as the transfer of his shares.
What will happen if the provisions of the shareholder agreement are breached? These discrepancies are surprisingly common and it is generally recommended to act quickly, as well as quick legal advice. A quick solution often depends on the clear and well-formulated wording of the shareholder agreement and articles of association. It is important that these important documents provide reliable mechanisms for potentially controversial transactions and for dispute resolution in the event of an error. Therefore, in the event of a clear breach of a shareholders` agreement, the shareholder concerned should consider applying for an injunction in order to secure its legal position. Non-injurious shareholders may receive financial compensation to compensate for the damage caused by the breach of the shareholders` agreement. Another remedy is to annul the consequences of the infringement – for example, to annul the result resulting from non-compliance with the voting requirements set out in the shareholders` agreement. If the infringement is essential, non-injuring shareholders also have the option to cancel the contract and sign a new contract among the non-injuring shareholders.. . . .