When you invest in a company, you are essentially lending them money so they can expand their business and reach new customers. In exchange for your investment, you receive shares of stock in the company.
Investing in a company is a risky proposition, and while most investments pay off, they can also backfire. Sometimes a business will experience financial problems due to poor management or unforeseen circumstances.
If this is the situation you currently find yourself in, you may need to consult with a shareholder dispute lawyer regarding shareholder dispute rights. Here are some red flags that signal you need legal help:
The Business You Invested in Has Gone Bankrupt
When a company goes bankrupt, it means they are unable to pay their debts. It’s not uncommon for shareholders to be left out in the cold where they lose some or all of their investment if a court-appointed trustee sells their shares. Additionally, bankruptcy proceedings tend to put shareholders at the back of the line when it comes to recouping losses.
However, depending on the terms of the stock purchase, you may have some limited legal rights as a shareholder. That’s why it’s critical to work with an experienced shareholder dispute lawyer regarding your options for recourse.
If the company has insufficient assets to cover your losses, a shareholder dispute lawyer can help you file a complaint against the officers or directors of the company. This will allow you to recover damages from the individuals responsible for the decline in the value of your shares.
You Have Lost a Significant Portion of Your Investment
Losses can occur for many reasons, but when a company experiences a significant drop in the price of its shares, it could signal broader issues with the company. So, if you have lost a significant portion of your initial investment, it might be time to consult a shareholder dispute attorney.
Depending on the situation of the company you invested in, you may be able to press them to do more to regain their footing and increase the value of their shares or request that the company repurchase your shares.
Keep in mind that repurchase rights (aka buyback rights) may be limited to the original shareholders who purchased shares directly from the company. In many cases, shareholders who acquired shares on the open market will not be eligible for repurchase rights.
The Company Misled You Before You Invested
When you invest in a company, it is your responsibility to thoroughly investigate the business and speak with financial experts about your investment. However, if you believe the company misled you before you invested, you may be able to file a shareholder dispute lawsuit.
Some examples of misleading actions before an investment include:
- The company hid financial problems
- The company misrepresented the value of their shares.
- The company failed to disclose negative information about the business
- The company’s executive team failed to disclose conflicts of interest
- The company made inaccurate predictions about the growth of the business.
It’s important to note that certain types of misrepresentations are not actionable. For example, if a company fails to meet its earnings projections, you cannot file a shareholder dispute on those grounds alone. However, if the company made a false or misleading statement that would reasonably have caused you to make a different decision before investing, you may have a valid complaint.
It’s also worth mentioning that you can only file a shareholder dispute on false or misleading information that was distributed before your investment. False or misleading information discovered after you’ve invested will not be grounds for a shareholder dispute.
You Believe the Company Committed Fraud
If you suspect the company engaged in fraudulent activity, you may be able to file a shareholder dispute suit against the company.
Fraud can take many forms, including misappropriation of corporate funds, misleading investors, or intentionally misleading the public. As per the Securities and Exchange Commission fraud is “conduct that is deceptive or fraudulent or that is intended by the person engaging in the conduct to defraud someone.”
When determining if the company engaged in fraud, you must look at the circumstances leading up to your investment. You should review all public information, company meetings and financial reports. If you believe that the company intentionally misrepresented their business or financial situation, you may be able to file a shareholder dispute lawsuit.
However, fraud is a tricky thing to prove, so you may need to hire an experienced shareholder dispute attorney if you’re attempting to file a fraud complaint against the company.
Company Leadership Refuses To Acknowledge Your Concerns
Some shareholders feel confident that the company will rebound, while others feel they need more accountability from the business. If the company leadership refuses to acknowledge your concerns and address the issues you see in the company, you may want to consider filing a shareholder dispute lawsuit.
You Are Unable To Sell Your Shares
If a company is facing financial problems, it may prevent shareholders from selling their shares. This can make it difficult for shareholders to recoup their investment.
However, this does not give the company the right to violate your rights as a shareholder. You can file a shareholder dispute against the company in this situation. Your attorney can help determine if this is a viable option in your situation.
The Bottom Line
When you buy stock in a company, you are buying a stake in that business. It’s an equity investment with legal and financial implications. You own a piece of the corporation, and as such, you have rights as a shareholder.
While investing in a company comes with inherent risk, that does not mean you should accept a subpar return on your investment. If you believe the actions of the company merit a lawsuit against its leadership, you may be able to file a shareholder dispute suit.
A qualified attorney can help evaluate your case and provide sound advice based on their years of experience handling these types of cases.