Mediation in Shareholder Disputes
For shareholders, partners and co-owners who can no longer work it out together, but do not want the business to suffer from years of proceedings.
Most shareholder disputes do not start with an argument, but with a difference in expectations that goes unaddressed for too long. One wants to grow and invest, the other wants dividends or security. One works sixty hours a week in the business, the other feels their capital weighs just as heavily. As long as things go well, this stays beneath the surface. As soon as results disappoint, an acquisition presents itself or one of them wants out, everything comes to the table at once.
At that point, two things are at stake: the relationship between the shareholders and the business itself. Mediation addresses both. The goal is not to determine who is right, but to find an outcome that allows both of you to move forward, together or separately.
Situations where mediation often provides a solution
- A deadlock between two shareholders each holding 50% of the shares
- Disagreement over strategy, investments or dividend distribution
- A partner who wants to exit, or whom you want to buy out
- Discussion about the value of the shares or the interpretation of the shareholders' agreement
- A conflict between a managing director and a minority shareholder or investor
- Tensions after an acquisition, for example over an earn-out or the seller's role
Mediation or court proceedings?
Corporate law offers shareholders various legal routes. Under the statutory dispute resolution procedure, a shareholder can compel another to transfer their shares, or exit themselves. The Enterprise Chamber can be asked to order an inquiry into the company's policy, with the possibility of far-reaching interim measures. Those routes are sometimes unavoidable, but they are costly, take a great deal of time and place the decision with a judge who knows the business only from paper.
In mediation, the shareholders keep the outcome in their own hands. This creates room for solutions a judge cannot impose: a phased buyout, an adjusted division of roles, a temporary advisor at the table or agreements about how you will address each other going forward. Moreover, the conflict stays behind closed doors, which is often of great value to customers, staff and financiers.
How does mediation between shareholders work?
The process begins with a confidential preliminary meeting with each of the shareholders separately. This gives you the space to tell your side of the story and identify what you need to move forward. Then we sit down together. I structure the conversation, ensure both parties are heard and help separate the factual questions from the emotions that often lie beneath.
Where necessary, we involve an independent valuer, an accountant or the parties' own lawyers. Once you reach agreement, we record the arrangements in a settlement agreement. This is legally binding and can be reviewed by your advisors before you sign. Read more about the mediation process step by step.
What does a shareholder dispute cost?
The biggest cost of a shareholder dispute is rarely on an invoice. Decisions stall, good employees leave, customers notice that leadership is divided and the value of the business, and therefore everyone's shares, declines. With the Cost & Risk Scan you get insight in a few minutes into what the continuation of your conflict really costs, set against the cost of mediation.
Frequently asked questions
What can I do about a conflict between shareholders?
Roughly speaking, there are three routes. You can continue negotiating, with or without lawyers. You can go to court, for example with a dispute resolution procedure or an inquiry request to the Enterprise Chamber. Or you choose mediation, in which you work out a solution yourselves with a neutral mediator. Mediation is often the fastest and least damaging route, and does not preclude a later court case.
What happens with a deadlock between two shareholders each holding 50%?
In a 50/50 arrangement, neither shareholder can push through a decision. If the shareholders' agreement also offers no way out, the company quickly becomes paralysed. In mediation, we explore which outcome is acceptable to both: a new division of roles, a buyout of one of the parties at an agreed valuation, or an orderly winding-up.
How long does mediation take in a shareholder dispute?
That depends on the complexity and on whether a valuation of the shares is needed. Many processes involve several sessions, spread over a number of weeks. Court proceedings or proceedings before the Enterprise Chamber generally take considerably longer.
Will my lawyer and accountant remain involved?
Yes, and that is often wise. The mediator guides the conversation and safeguards the process; your advisors assess the legal and tax consequences of the agreements. The result is laid down in a settlement agreement, which you can have reviewed by your own lawyer before signing.
Is what is discussed in mediation confidential?
Yes. All participants sign a mediation agreement in advance that includes confidentiality. What is put on the table in mediation cannot be used against you in any subsequent proceedings.
Is the conflict mainly between directors or within the board? Then also see mediation in corporate disputes or conflicts after an acquisition.
Stuck in a conflict with your co-shareholder or partner? A first, confidential conversation often clarifies whether mediation is the right way forward.
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