I. Protecting a Majority Owner’s Corporate Rights in a Shareholder Dispute
TB Legal provided legal assistance to a client in connection with a shareholder and director dispute arising within a company. The matter involved corporate governance, access to financial and corporate information, the conduct of the company’s director and a potential change in management.
The client held a majority interest in the company. Given the circumstances of the dispute, it was necessary to assess the client’s corporate rights as a whole and determine the legal steps required to obtain relevant company information, evaluate the director’s conduct and exercise corporate rights through legally compliant procedures.
The applicable corporate framework was assessed with reference to the Law of Georgia on Entrepreneurs, which regulates the rights and responsibilities of partners, company management and corporate decision-making in Georgia.
II. Shareholder Rights and Access to Company Information
One of the key issues in the matter concerned access to the company’s financial, contractual and other corporate information.
Access to reliable company information is important for a shareholder both to protect its economic interests and to exercise the rights granted under applicable law and the company’s corporate documents.
TB Legal identified the categories of information and documentation relevant to the client’s position and prepared the necessary legal communications addressed to the company and its management.
This work formed an important part of establishing the client’s legal position before further corporate steps were taken.
III. Assessment of Director Conduct and Potential Conflicts of Interest
The dispute also required a legal assessment of the director’s conduct.
TB Legal reviewed the director’s management and representation activities, the relevant corporate documentation and the potential effect of those actions on the client’s corporate rights and the company’s interests.
Particular attention was given to commercial relationships and circumstances requiring additional review from the perspective of a potential conflict of interest.
Director authority, fiduciary duties, conflicts of interest and representation risks are examined in more detail in our article Company Director in Georgia – Powers of the Management Body, Fiduciary Duties and Representation Risks.
IV. Preparing the Procedure for a Change of Director and Shareholders’ Meeting
As the dispute developed, it also became necessary to address issues relating to the company’s future management.
TB Legal assessed the corporate procedure required for a potential change of director, including the convening of a shareholders’ meeting, preparation of the agenda, termination of the existing director’s authority and appointment of a new management person.
Compliance with corporate procedure was particularly important because defects in the convening of a meeting or adoption of a corporate resolution may create additional disputes concerning the validity of the decisions taken.
TB Legal therefore prepared the relevant corporate documentation and determined the legal procedure required for the adoption of the contemplated corporate decisions.
V. Developing an Integrated Legal Strategy
Given the nature of the dispute, addressing each issue separately would not have been sufficient.
TB Legal conducted an integrated assessment of:
- the client’s corporate rights as the holder of a majority interest in the company;
- access to the company’s financial and corporate information;
- the director’s conduct and authority;
- potential conflicts of interest;
- the procedure for convening a shareholders’ meeting and adopting corporate resolutions; and
- the legal mechanisms available for a potential change in company management.
As a result of the engagement, the relevant legal communications and corporate documentation were prepared and a structured legal strategy was developed for the client’s further actions.
The matter demonstrates that a shareholder dispute may involve significantly more than a disagreement between owners. Questions concerning access to information, director conduct, management authority, conflicts of interest and corporate control may arise simultaneously and therefore require a coordinated legal assessment.
VI. Legal Support in Shareholder and Corporate Disputes in Georgia
TB Legal is a law firm in Georgia advising companies, shareholders and investors on corporate governance and disputes arising within businesses.
Our Corporate Lawyer in Georgia practice includes legal assistance with shareholder disputes, access to company information, director authority and liability, corporate resolutions, changes in management and other corporate governance matters.
Where corporate relationships or management structures require broader preventive restructuring, our analysis on Legal Structuring of a Company – How to Reduce Business Legal Risks explains how governance, management authority and internal corporate documentation can be organized to reduce future disputes.
If your company is facing a shareholder dispute, management conflict or another corporate governance issue in Georgia, you can contact TB Legal to discuss the legal options available in your specific circumstances.