5 Common Reasons for Shareholder Disputes

 Posted on December 13, 2025 in Litigation

Shareholder relationships generally start with optimism and enthusiasm, but when expectations are different, even healthy Florida businesses can find themselves facing disputes. From disagreements regarding money to power struggles in decision-making, shareholder disputes can quickly derail operations, destroy trust, and interfere with growth. This means a thriving Florida business can unravel quickly when shareholders no longer see eye to eye.

Shareholder disputes (Chapter 607 Florida Business Corporation Act) are especially common in Florida’s closely held and family-run companies, where personal relationships collide with business decisions. What begins as a minor disagreement can snowball quickly into stalled projects and even litigation.

When you understand the most common shareholder conflicts and why they arise, you can often resolve them before they threaten your business's stability. Having an experienced Broward County, FL business law attorney by your side can help the entire process go much more smoothly and prevent disputes before they arise.

Why Do Florida Shareholder Disputes Arise?

Even in the most well-run company, shareholder disputes can arise; this is relevant for Florida corporations, S corporations, closely held companies, and family businesses across the state. The importance of solid shareholder agreements, bylaws, and operating procedures is crucial. The five most common reasons that a disagreement can escalate into a formal legal shareholder dispute include:

Breach of Fiduciary Duty

A major cause of shareholder disputes is a breach of fiduciary duty, which can occur when directors, officers, or majority shareholders fail their duty of care to make informed, good-faith decisions. It also occurs when a shareholder’s duty of loyalty to act in the company’s best interests rather than their own self-interests is ignored. Acting against the company’s best interests could include violating regulations, making risky investments, or engaging in fraudulent accounting.

Using company assets for personal gain, engaging in competing businesses, or taking opportunities meant for the company also fall under breach of fiduciary duty. Using non-public information for personal profit or intentionally misrepresenting facts is not only considered insider trading and fraud, but it also constitutes a breach of fiduciary duty.

Financial Mismanagement or Transparency Concerns 

Allegations that officers or majority shareholders are mismanaging company funds can be devastating to the company while also leading to shareholder disputes. Financial mismanagement can include claims of improper expense reimbursements, self-dealing, or undisclosed liabilities, as well as failure to provide accurate or timely financial reports. Red flags regarding potential mismanagement can include sudden drops in revenue, unexplained losses, or refusal to provide annual statements.

Unequal Workloads, Compensation, or Profit Distribution

Minority shareholders often feel "frozen out" of the company's profits, particularly when majority owners are taking unusually large salaries or bonuses. Majority shareholders could be paying themselves excessive salaries or bonuses, draining profits that should be distributed to minority shareholders as dividends. In small, closely held Florida companies, confusion over roles is likely to be more common, and there may be differences in expectations versus reality; i.e., sweat equity contributions are not matched in compensation.  

Some shareholders may work hard labor-wise, but receive less in salary and dividends than others who contribute less capital or effort. Ambiguous agreements are likely to create resentment.  Stronger shareholder agreements with clearly defined roles, responsibilities, compensation, and profit distribution are crucial. Base salaries and bonuses should be based on market rates and contributions rather than just control. Workloads, finances, and business direction should be openly discussed.  

Disagreements Regarding Major Decisions or Company Direction

Disagreements on major decisions like investments, leadership, profit distribution, or growth strategies are common causes of shareholder disputes. There may be conflicts regarding expansion, entering new markets, or acquiring other businesses. Disputes can arise from disparate financial priorities, like how profits should be reinvested, dividends paid, or capital managed.

Disagreements regarding appointing executives, the composition of the board, or operational changes are common. Shareholders may also experience conflict when some want to sell shares and overvalue those shares. It is normal for shareholders to have diverse personal goals, which can create tension when the direction of the business does not align. In closely held companies, equal ownership can potentially cause operational paralysis when owners are unable to agree.

Ownership Changes, Buyouts, or Succession Problems

Disputes often arise when one shareholder wants to exit the company. Arguments over the valuation of shares, particularly in Florida’s thriving small-business sector, are common. There may be triggering events for these disputes, like divorce, death, disability, or retirement. When the buy-sell agreements are inadequate, this can lead to costly litigation. There may also be significant complexities arising from inherited shares and minority-owner protections.

What Causes These Disputes to Escalate?

Even disagreements that are relatively small to begin with can quickly escalate when there is a breakdown of communication or a lack of formal documentation. In small or family-run businesses, there is a much larger likelihood of complicated emotional dynamics that can result in shareholder disputes. Demands for books and records or injunction requests often trigger litigation. Delays and disputes not only harm the company’s finances but also its public image.

How to Prevent Shareholder Disputes Through Strong Agreements

Strong agreements can keep shareholder disputes to a minimum. Roles and responsibilities must be clearly defined. This means that who does what is unambiguously outlined, ensuring accountability for day-to-day operations. Voting rights should be specified, along with who holds authority for different types of decisions (financial, strategic, etc.).

The agreement must provide financial clarity by addressing profit distribution, capital contributions, compensation, and fair valuation methods for shares. Buy-sell agreements with rights of first refusal should always be a part of the agreement. Finally, there should be clear dispute resolution paths in the agreement, whether that means mediation or arbitration clauses to handle disagreements privately and efficiently while avoiding litigation.  

Contact a Fort Lauderdale, FL Business Law Attorney

If you are worried about shareholder disputes, having an experienced Broward County, FL disputes and litigation lawyer from The Elliot Legal Group, P.A. can make a significant difference. Attorney Elliot also practices international business law and is a licensed solicitor in both England and Wales. Call 754-332-2101 to schedule an initial attorney meeting with Attorney Elliot.