When business friendships turn contentious: Lessons from shareholder disputes
15 August, 2025
We have seen time and again how even the most promising business relationships can reach a breaking point when shareholder disputes arise. It is a reality that sometimes, the same partnership that once launched a venture can become the source of deep conflict - especially when the question of what a company is worth enters the conversation. That was the theme of a recent IR Global podcast where Managing Partner, Kyle Broadhurst, spoke with Nevin Sanli of Sanli Pastore & Hill, a leading valuation expert based in the United States. Together, they explored how legal strategy and business valuation intersect in these disputes, particularly in the Cayman Islands. Valuation disputes and legal remedies Disagreements over value can emerge in many ways. Sometimes they are part of an amicable exit - one shareholder wishes to leave, and the parties simply need to agree on a price. Other times, they form the heart of high-stakes litigation. In the Cayman Islands, for example, minority shareholders have the right under section 238 of the Companies Act to challenge the price offered in a merger or consolidation. Valuation also becomes critical in divorce proceedings involving company shares, or in cases where a minority shareholder claims they are being treated unfairly and seeks to have their interest purchased rather than winding up the company. From a legal standpoint, the remedies available depend on the circumstances. Section 238 proceedings are focused on determining the “fair value” of shares, while just and equitable winding-up petitions address more extreme cases of oppression or breakdown in relations. There are also derivative actions, where shareholders sue on behalf of the company to address misconduct by directors. Each path brings its own procedural and evidentiary challenges. This is where valuation expertise is essential. One of the most significant issues in these cases is understanding the difference between “fair market value” and “fair value.” Fair market value reflects what a willing buyer would pay in an open market and often includes discounts for lack of control and lack of marketability, particularly for minority holdings. Fair value, on the other hand, typically excludes these discounts, valuing the shares as if the company were sold as a whole and the shareholder received their proportionate share. Protecting minority shareholders For minority shareholders in private companies, the reality can be sobering. Without control, it is difficult (often impossible) to sell their stake on the open market. The majority shareholder may have the power to control dividends, set salaries, and direct the company’s spending, sometimes in ways that leave the minority feeling sidelined. While there are legal avenues to challenge improper conduct, they can be complex and costly to pursue. This is why we always emphasise the importance of well-drafted shareholders’ agreements. Ideally created at the outset of a business relationship, these agreements can set clear rules for what happens if a shareholder leaves, how valuations will be conducted, and whether certain discounts will apply. Such provisions can prevent years of dispute and significant legal expense. Cross-border expertise Furthermore, the value of international collaboration cannot be overstated. At Broadhurst LLC, we frequently work with experts outside the Cayman Islands. Our courts readily accept foreign-qualified experts in technical matters such as valuation, and the IR Global network has been invaluable in connecting us with trusted professionals. In this case, my professional relationship with Nevin began at an IR Global conference, and has since developed into an active working collaboration on matters requiring cross-border expertise. Shareholder disputes are never easy - they involve legal complexity, financial precision, and often a strong emotional component. By combining clear legal advice with rigorous valuation expertise, we aim to guide clients through these challenges in a way that protects their interests and allows them to focus on the future. If you are facing a potential dispute, or want to prevent one, speak with our team at Broadhurst LLC to understand your options and protect your position from the outset. You can reach us directly at +1 (345) 949-7237 or info@broadhurstllc.com