Shareholder disputes affect companies of all sizes across all industries in Australia and are far more common than you might think. The transport and logistics industry is certainly not immune.
In our experience, these disputes generally arise as a result of, or in connection with, disagreements amongst shareholders concerning the following:
- a breach of the company’s constituent documents by a shareholder, including the constitution or shareholders’ agreement;
- how the company should be managed;
- how the related business should be managed and its strategic direction;
- the roles and responsibilities of shareholders (and directors) within the business, as well as their performance of those roles and responsibilities;
- financial matters, including the distribution of profits;
- the valuation of shares; and
- fraudulent acts or misconduct.
Your options once a shareholder dispute arises will depend on the nature of the dispute that needs to be resolved and whether or not the company has in place a well-drafted shareholders’ agreement that clearly sets out the rights, obligations and dispute resolution process.
Shareholders’ agreement
When your company is incorporated, each of the shareholders will have expectations about how the company and its related business should operate. Your shareholders may have also agreed on the skills, expertise and effort that each shareholder is expected to contribute.
One of the best ways to prevent a shareholder dispute is to be open and transparent about those expectations at the outset. They should also be clearly stated in a shareholders’ agreement so that you have a clear point of reference to turn to when things go wrong, or ideally, before things go wrong.
Your shareholders’ agreement, together with the company’s constitution, can help to prevent a dispute from arising in the first place because it sets out the corporate governance and decision-making rules for the company, as well as the shareholders’ rights and responsibilities. There is far less room for confusion about what has already been agreed upon when it is stated in writing and signed by the relevant parties.
Your shareholders’ agreement should also include a process to be followed if a dispute cannot be prevented, to ensure that the issue can be dealt with efficiently and effectively.
Alternative dispute resolution
If the company does not have a shareholders’ agreement in place, then often the best course of action is to seek agreement among the shareholders on the relevant issues (including, if necessary, an agreement to attend mediation in respect of the disputed matters).
If this cannot be achieved, then the following option may be open to you:
- Sell your shares — you might consider offering to sell your shares in the company to the other shareholder/s at a fair and reasonable price. Alternatively, you may choose to sell your shares to a third party. If you do, the other shareholders may have to approve of the new shareholder or may even have an option to match the third party’s price (a pre-emptive right). You will also need to agree on a valuation of the shares. This can be done in consultation with an independent party to avoid further disputes.
- Buy out — alternatively, you might offer to buy out one or more of the other shareholders in dispute. Similarly, you will need to agree on a fair and reasonable valuation of the shares in this scenario.
- Bring a claim — You might seek to bring a claim against another shareholder if their conduct amounts to a breach of the shareholders’ agreement or has resulted in damages suffered by the company.
- Apply to a court to wind up the company — if all else fails, you could apply to the court to wind up the company because it is ‘just and equitable to do so’. Section 461(1)(k) of the Corporations Act 2001 (Cth) provides that the court may order the winding up of a company if the court is of the opinion that it is just and equitable that the company be wound up. This is an extreme, but sometimes necessary, measure.
Without a shareholders’ agreement in place, dispute resolution among shareholders can be a long and costly process.
By implementing preventative measures and equipping yourself with a broad understanding of your options should a dispute arise, you can limit those potential costs.
Contact us
If you are a part of a transport and logistics company and need more information about shareholder agreements or resolving shareholder disputes, please contact a member of our Transport & Logistics group.
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