9 Important Questions About Unanimous Shareholder Agreements

9. How can the USA resolve Disputes

Disputes among shareholders are inevitable and can range from minor disagreements on day-to-day matters to deadlocks at the board or shareholder level. A USA should provide mechanisms for resolving disputes. The following are examples of dispute resolution procedures:

• Unilateral Decision by One Party: Disputes with respect to day-to-day business matters could be resolved by one party having a casting vote at board meetings.
• Discussion or Negotiation: Some USAs provide for a formal process to initiate discussions between parties, including a timetable for meetings.
• Mediation: Parties can agree to undergo formal mediation. Drafting issues can include identifying how the mediator will be selected and the procedures to follow in conducting the mediation. The required procedures for mediation may be incorporated by reference to a statute.
• Binding Arbitration: As with mediation, the key is setting limits on the process in advance. It will be important to consider the arbitrator’s powers to bind the parties. For example, whether they can only deal with determining monetary damages or whether the mediator will have discretion to tailor the remedies appropriately.
• Shotgun: Once triggered, one party will end up exiting the company, while the other party will remain.
• Sale of the Business: This is the most drastic remedy. Both parties will commit to an auction process to sell the entire business. The threat of this remedy can often serve to bring the parties together at an earlier stage.

These points are not an exhaustive list of the issues a USA could regulate. A USA can be tailored to fit each corporation’s specific needs. For more information please contact us at business@duplooylaw.com.

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