What are the rules surrounding shareholder disputes?

Shareholder disputes occur when two or more shareholders in a company argue about a decision or action taken by the company. In Virginia, there are several laws that govern how corporate disputes between shareholders are to be handled. The Virginia Companies Act of 2020 states that when shareholders disagree certain procedures should be followed. First, the corporation must provide an opportunity for the shareholders to settle the dispute through mediation or arbitration. Both sides must agree on an impartial third party to mediate the dispute. If the dispute cannot be settled through mediation, then the corporation may refer the dispute to the court. The reach of the court in shareholder disputes is limited to interpreting the shareholders’ agreement and the Virginia Corporations Act. Courts cannot order specific performance of a contract or compel a particular outcome. In other words, they cannot force the parties to reach a settlement or issue a particular ruling. When the court does issue a ruling in a shareholder dispute, the parties are legally obligated to abide by it. If a shareholder fails to comply with the ruling, the other shareholder can petition the court for specific performance. The court must then rule whether a particular order or action is justified. The court also has the right to issue injunctions to prevent a shareholder from doing something that could harm the corporation. In a situation where a shareholder might misuse corporate funds or assets, the court can prevent them from doing so. This protects all of the shareholders of the company from unfair or improper actions.

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What are the rules surrounding shareholder disputes?

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