Litigation may appear to be the logical way to resolve a dispute with the shareholders of your company.
However, there are disadvantages to bringing your shareholder issues to court. You might wish to explore arbitration as a non-public and more expedient option.
Litigation is often an expensive way to resolve business disputes and it is usually a lengthy process. Also, it is likely that neither you nor your shareholders will be comfortable airing your differences in public.
A form of alternative dispute resolution, arbitration takes place in a private setting outside of court. Instead of going before a judge, you and your shareholders will meet with an arbitrator, an informed third party who can deliver a ruling about the dispute. The goal of the arbitrator is to determine whether there was wrongdoing, and, if so, what kind of redress is available for the injured party. You and your shareholders have the right to agree on the framework of the arbitration process.
Arbitration versus litigation
There are several differences between arbitration and litigation:
- You and your shareholders may exchange documents with each other, which is a more streamlined procedure than the discovery process in litigation
- Arbitrators do not have to follow either state or federal rules of evidence and are not bound by legal precedent
- The decision of the arbitrator is binding just as a decision would be in litigation, but unlike litigation, appealing the decision is not permitted in arbitration
Although it is advisable to settle certain business disputes in court, litigation is not the only means to an end. Arbitration may be the quickest, most reasonable and most cost-effective way to settle the issue between you and your shareholders.