Running a business is a complicated endeavor. The relationship between shareholders and directors are often fragile. There are frequent disputes between the two that can leave a lot of tension. Not to mention, there are big life changes such as the death of a shareholder or differing visions for the company that can leave a misalignment between shareholders and directors. In these situations, liquidation might be the answer to the problem. Principle Insolvency is here to talk about how liquidation can be helpful when there are shareholder disputes.
Causes for Business Relationships to Breakdown
It is not uncommon for business relationships to deteriorate over time. There are times that these disputes can leave a company paralyzed and the day to day operations of the company come to a screeching halt. It can impact the viability of the company. It can lead to greater risk of insolvency. It is one of the reasons why these business relationships should be a priority for companies. Some of the reasons why these relationships start to deteriorate include:
– Feelings of certain people working harder than others
– Disagreements about retirement & plans to exit
– Lack of communication and relationship deterioration
– Disagreeing on direction of company and business strategies
Liquidation Offers Structure
When shareholders decide to move into liquidation voluntarily, it is known as solvent liquidation. This can be a great option to offer direction to a resolution between shareholders who are in a dispute. This is how it can be beneficial:
– One party is able to exit while the other shareholders buy them out
– There is a fair valuation of the assets in question so that there aren’t any disagreements about reducing the price
– Ensures all creditors are paid
– Facilitates a clean break from the company
When Liquidation Should be Considered by Shareholders
Often, liquidation is seen as a failed company. However, this isn’t always the case. Liquidation is actually helpful in protecting all parties that are affected by a shareholder dispute. These are circumstances in which liquidation might be appropriate:
– Medication has failed and shareholders are in a grid lock
– There is a party that wishes to exit but it has been difficult or impossible to reach an agreement on terms as well as prices
– There is a key player that has passed away and no one desires to continue running the company
– Even if the company is solvent, the daily operations cannot continue because of the disputes
Insolvency Services in Auckland, Hamilton, Levin & New Zealand Wide
If you are a company that is struggling with shareholder disputes, you can turn to Principle Insolvency to help you find resolution. This may include the liquidation process as it provides a clear direction to appease all parties involved. We work to help shareholders and directors do what is best for the health of the company as we walk them through the liquidation process. Call us today!