Corporate Attorneys Orange County – Managing Corporate Disagreements (A Processed Video Transcription)

Andy Gale of Gale and Vallance Corporate Attorney Orange County

Hi! I am a trusted advisor, I am a corporate attorney Orange County, and my name is Andy Gale.  I specialize in assisting shareholders and business owners in formation of corporations and maintenance of corporate records.

This week I had a call from a client who owns a small business corporation in Orange County.  He was a 50% shareholder with another person and they went into a problem.  It’s not an uncommon problem with shareholders of corporations but when they originally formed their corporation they’ve decided that they wanted to be 50-50 owners and when things are going well, of course, that’s a good thing because when they are working together and making decisions.

The problem however arose in a situation where the two shareholders had a disagreement as to what ought to occur in a business matter in relation to the corporation; so they were stuck, they were at a standoff and they didn’t know what to do.  So they called to ask a corporate attorney Orange County for some suggestions.

4 Methods to Resolve Corporate Disagreements

Dispute Resolution Agreement – Corporate Records

First Option: The Dispute Resolution Agreement

I told them that I thought that they had basically four different directions to go.   The first place they needed to look is to see whether or not in corporate records they have the document what we call the “Dispute Resolution Agreement”.  The purpose of the Dispute Resolution Agreement is that it will set out a formalized process on how shareholders with equal power would actually work through a situation like this, and if there is such an agreement in effect it is those rules that must be followed.

Second Option: Bylaws of the Corporation

Call for a Special Meeting

The second place they should look is in the “Bylaws of the Corporation”. The bylaws of the corporation are essentially the framework for how exactly an operation would run within the corporation.  One of the pieces of the framework is how do we do meetings?  There are two kinds of meetings, regular meetings, and special meetings.  In this case, it would probably be a special meeting.

There will be a process set out in the bylaws on how exactly that meeting should be run in terms of when do we give notice, how much time notice must be given, exactly what the agenda items will be.  But it’s a very good idea when the shareholders get stuck to formalize the discussion process by exercising the right to call a special meeting and having a special meeting to discuss this particular issue.

Third Option: Third-Party Mediator

Third-Party Mediator

A third option would be to retain an outside third party mediator; there are companies in most cities that offer dispute resolutions services wherein you bring in an independent third party like a retired judge explaining the matter in front of them.  The judge will formalize the process and assist the shareholders that are stuck in coming to a resolution of the problem that would be mutually satisfactory to both parties.

Final Option – Dissolve a Corporation

Dissolve a Corporation

And finally, the fourth way to approach it would be, if necessary, the two shareholders could agree to actually dissolve a corporation.  The corporation could be dissolved on a vote of a person holding 50% or more of the shares and in this particular case that was the factual scenario.  To dissolve a corporation of course is probably the worst of all of the solutions and ideally, one of the other three things that we’ve discussed earlier would be the most effective way for the shareholders to move beyond the problem and get back to running their company.

I hope this information was helpful and if you want to look down below this video, you will find some other links to other videos that we, Gale and Vallance Corporate Attorney Orange County created that hopefully would be of some assistance to you in running your corporation.

Or you may visit our website for more information on corporate attorney services that we offer. Click here – https://www.incorporationattorney.com/.