Corporate Dissolutions and Receiverships
When a dispute arises in a business or corporation, it is essential first to review the written documents, such as a shareholder agreement or partnership agreement, as those documents will hopefully resolve the contested issue.
Partner and Shareholders Disputes and Dissolution
If your shareholder agreement or partnership agreement is well-drafted, then it will contain the necessary procedure to provide a solution to the partners' and/or shareholders' disputes. Even if the dispute is minor, it is imperative to intervene early in the conflict and come to a resolution. Otherwise, the longer it takes to resolve, it may be difficult for the other partners or shareholders to be satisfied with the result. Another reason that it is imperative to intervene early and come to an agreed resolution is all partners and shareholders need to protect their rights. Finally, when a disagreement arises, you should resolve the issue quickly and cost-effectively, such as through mediation or arbitration.
Alternatively, if the partners and shareholders were unable to put their differences aside and save the business, then the other option would be to dissolve the business. Again, relying on the written shareholder agreement or partnership agreement is vital in dissolving the business, as it will provide the details in how the dissolution of the business happens.
Shareholder Derivative Claims
In the day-to-day management of a business, individual shareholders typically do not have much power to control the company. The Board of Directors oversees the management of the company and appoint the Officers to manage the day-to-day affairs of the company. Thus, the Directors and the Officers are in charge of protecting the company and its shareholders.
When Directors and the Officers fail to take steps to protect the company and its shareholders' rights and interests, the law allows the shareholders to file a claim against the Directors and Officers so they can restore the harm done to the business. Some examples of wrongdoing by the Directors and Officers where shareholders may file a claim are as follows:
Fraud or other unlawful activity
Conflict of interest
Waste of corporate assets
Breach of fiduciary duty
Section 607.1432 of the Florida Statutes provides for the appointment of a receiver whenever a dissolution or liquidation of a corporation takes place. The primary purpose of the receivership is to manage the business and to hand over the business to a receiver who is a neutral party that has experience and skill within the corporation.
In a corporate receivership, a bankruptcy court usually appoints a receiver. Receiverships are common in bankruptcy court and also common when there is a corporate deadlock, mismanagement, or civil theft within the business. Once appointed by the Court, the receiver has the ultimate decision-making powers over the business. Additionally, the receiver has full discretion in deciding the management of the business assets.
If there is a corporate receivership established, the business may benefit because it provides an opportunity for restructuring the company. Restructuring, in some instances, is preferable as opposed to liquidating all of the assets.
If you are a partner or shareholder and need to discuss issues relating to the dissolution of your corporation or a possible receivership, please contact Kimberly M. Soto at 321.972.2279 so she can further advise you.