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Shareholder Disputes

Shareholder disputes are another potential source of litigation for a small or medium-sized business. Whenever multiple people share control of a corporation, and they are not family members, it may be a good idea to have a shareholder buy-sell agreement, which is a contract between the owners. These agreements spell out what a shareholder’s interest is worth and what would happen if the shareholder is forced out or wants to leave. They protect the business from interference by third parties and provide a method for dividing the business in case of various triggering events, such as shareholder disability, death, retirement, or bankruptcy.

Shareholder litigation in which there is no written shareholder buy-sell agreement may require the retention of experts to perform a forensic evaluation of the business. In California, if a shareholder dies and there is no buy-sell agreement, the decedent’s heirs will take over, which means that surviving shareholders may have to operate with the shareholder’s spouse or children, who may have a different idea of how the business should be run.



Employment Litigation

Another issue of which all companies must be aware is the possibility of litigation brought by disgruntled employees. Claims that may come up when an employee is unhappy or has been terminated sometimes include allegations of employee misclassification, improper meal periods or rest breaks, wage and hour law violations, or the improper distribution of tips. California law provides more protections to non-exempt workers than federal law does. Non-exempt workers are entitled to a 30-minute meal break when working more than five hours in a workday, and 10-minute rest breaks for every four hours worked. When an employer does not follow these rules, it must pay an extra hour of regular pay for each day on which there was a break violation. In many cases, however, these claims are brought without a meritorious basis, merely because the employer-employee relationship broke down. The assistance of a capable attorney can be critical in defending a business and minimizing liability to the extent possible.



Real Estate

Real estate litigation and construction defects may also present a concern for small and medium-sized entities. California is considered a hotbed for construction defect lawsuits, and these claims can result in prohibitive insurance premiums or bankruptcy for a construction company or developer. California Civil Code Section 895, et seq., also known as the “Right To Repair Act” or “SB 800,” provides defined defects. These defects do not require “property damage” to be actionable. Among other things, the statute requires parties to meet and confer, and it gives a builder the right to repair alleged defects, conduct an inspection, and respond to claims with a certain time frame.


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Bankruptcy filings by clients who are indebted to your business are a possible reality that may arise for your California company. The bankruptcy process requires specific rules to be followed by both the debtor and the creditor. An individual or company’s financial situation may be revealed in the bankruptcy filing and the 341 notice received by your business. In addition to the type of bankruptcy filed and the date the case was filed with the court, these documents will also describe the following:


  • Court in which the bankruptcy case is being heard;
  • Deadline to file a proof of claim;
  • Time, date, and place for the first meeting of creditors; and
  • Rules for collecting what is owed to your business.

Schedule a call or send me your case details by filling the contact form.