An individual shareholder’s rights are usually tied to an established shareholder agreement. A shareholder agreement is essentially the foundation for a corporation. This legal document should lay out all of the details regarding the business. Among the details included in a shareholder agreement are the responsibilities, rights, and benefits of each individual shareholder as well as how disagreements between shareholders will be resolved.

A corporation’s directors, officers, and majority shareholders owe a fiduciary duty to minority shareholders and the company itself. However, when an individual in one of these positions acts in bad faith, makes secret profits, or enters into a conflict of interest, they are in breach of their fiduciary duty. Usually a breach of fiduciary duty will result in financial remedies such as damages for any lost profits as well as the recovery of any profit and salary paid to the individual while they acted in breach of their duty.

Any enterprise involving several people is bound to run into conflicts at some point. Shareholder disputes are among these conflicts and arise from a wide range of matters regarding the company. However, some of the most common issues that can lead to disagreements among shareholders can include the company’s strategy or direction, salaries paid to shareholders who are also employed in the company, or unbalanced financial contributions from individual shareholders.

The decision-making process within a corporation is usually stipulated in the company’s shareholder agreement, but for the most part, decisions are reached through a vote. A majority of matters can be resolved through a simple majority vote. However, when a significant decisions is to be made, a higher majority of votes is required. It’s also important to note that if majority shareholders are taking advantage of their position, there is protection available to minority shareholders.