What are the rules surrounding shareholder disputes?

In Maryland, the rules surrounding shareholder disputes are laid out in the Maryland Code, Corporations and Associations Section 1-401 et seq. A shareholder dispute occurs when two or more shareholders do not agree on a particular decision or action related to a company. Generally, a shareholder dispute can range from a disagreement on how to run the company, how to distribute profits, or the use of company resources. Shareholder disputes can also arise from a shareholder’s breach of fiduciary duty, the interpretation of the company’s by-laws, and other various matters. In order to resolve a shareholder dispute without resorting to court action, many companies create a Shareholders Agreement. This agreement outlines the expectations, rights, and responsibilities of each party. It is important to note that the terms of the Shareholders Agreement must be in compliance with the state’s statutory requirements and that any decisions it includes must, in turn, be approved and adopted by the company’s board of directors. If the parties fail to reach an agreement through the Shareholders Agreement, they may opt to settle the dispute through mediation or arbitration. Alternatively, they may bring the dispute to court for resolution. In Maryland, courts tend to be reluctant to intervene in business decisions and are unlikely to overturn actions that are in the best interests of the company. If the court does find that the parties’ actions were not in the best interests of the company, it can require one or more of the parties to pay damages to the other.

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What are the rules surrounding shareholder disputes?

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