What Shareholder Disputes Can Do to a Financial Institution

Shareholder disputes can come up in various ways. From shareholders not working for the business anymore to a disagreement of the overall direction of the company to personal problems affecting business relationships, these disputes can derail a financial institution’s path. Disputes can escalate because advice on how to handle legal rights is not advised early on and those involved don’t understand the best options and strategies to follow.

It’s important to know the risks of shareholder disputes and how they can affect a financial institution. Staying in the know will help to curb liabilities and losses.

Disputes within a financial institution can completely crack apart a well-oiled shareholder group. If decisions for the direction of the company, for example, rest on the shareholders and there’s a rift occurring, then there needs to be action.

If a dispute within an organization is related to the strategy and direction of managing a company, the company can choose to appoint an additional director who can help to avoid deadlock taking place or be more in favor to the wishes of certain shareholders over others involved. But adding another director or adviser will add to the liabilities that come with it. This is where having financial institution insurance is stressed.

Getting financial and legal protection against liabilities related to shareholder disputes should be the first steps in protecting a company. Having Directors & Officers Liability coverage will guard against these types of disputes so that a company is not held for more financial loss in the event of an escalated dispute. This kind of financial institution insurance will add peace of mind to a bank that is trying to work out rifts between shareholders and not cause any more financial trouble in the process.

At the center of any shareholders’ dispute is typically a struggle for control as well as the benefits that come with it. When there’s fallout between shareholders, they may complain of unprofessional handling of company duties and issues or even bring up fraud. In many different cases, shareholder disputes may involve a minority shareholder who has felt mistreated or disagrees with decisions made by other shareholders.

The resolution of such issues usually leans on the facts involved and the legal and insurance-related provisions that apply. What’s important is understanding the risks of a fallout and how they can impact a financial institution or any shareholder group. Minimizing risk and financial trouble due to disagreements should be a priority before issues arise. Staying ahead of the curve and implementing the right financial institution insurance will help to lower risk and minimize negative effects in the long run.


About Financial Guaranty Insurance Brokers

Since 1983, Financial Guaranty Insurance Brokers has distinguished itself as a provider of Professional Liability, Cyber Liability, and Crime insurance products for entities of all types. To receive timely, personalized service from a knowledgeable and experienced staff, call us today at (626) 793-3330 to speak with one of our professionals.