Shareholder disputes are not uncommon and a number of actions or misunderstandings can cause them. In order to resolve shareholder disputes, most companies will require the services of a Hong Kong law firm.
A solution that prevents and, if not, easily settles a shareholder dispute is the shareholder’s agreement – a document that is drawn up during the early stages of company formation. A lawyer in Hong Kong can help you conclude an agreement suited to the particularities of your company, the number of shareholders and the agreed upon dispute resolution methods.
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Sources of dispute among shareholders in Hong Kong
A company in Hong Kong will be thoroughly managed only as long as its shareholders have the same business goals and work to reach them using the same principles. Shareholder disputes can arise as a result of pursuing personal interest above the best interests of the company or expressing conflicting management ideas. Although the causes of disputes can be numerous, they can generally be included in the following categories:
– unequal profit distribution and other monetary issues,
– management authority: if a shareholder is also one of the managers and denies the other shareholders access to important information,
– disagreements in interpreting the shareholder’s agreements,
– inheritance disputes, especially if the shareholders are related or are married,
– disputes resulting from different management styles and others.
While the source of the dispute can be varied, the misunderstandings can be divided according to the number of people involved: shareholder vs. shareholder, one shareholder vs. the rest of the shareholders or a part of the shareholders against the rest.
Shareholder dispute resolution in Hong Kong
The provisions of the Companies Ordinance in Hong Kong govern shareholder dispute resolution. A special category of disputes concern acts that bring harm to the company: these concern solely the director of the company who is liable for his actions and many be charged with negligent management or breaches of his fiduciary duties towards the company.
Most shareholder disputes are solved in court with the help of a litigation lawyer. Although a preferred method, court litigation is often lengthy and may have a lasting impact upon the company. The consequences of a prolonged shareholder dispute include losing the business partners’ confidence, losing monetary resources and interrupting the usual functioning of the company. Arbitration is also an option, but only if it is included as an alternative dispute resolution method in the shareholder’s agreement.
Our Hong Kong law firm can provide you with adequate solutions and counselling in case of shareholder disputes. You can contact us for more information or legal representation.