Situations involving allegations of unfair distribution between business partners, so-called “shareholder disputes”, generally do not have an easy and clear path to a resolution. There are many ways in which a fellow shareholder can harm your company, either by receiving more than your due share, or by diverting money from the company for your own benefit. To do this, he can make a transfer to a bank account in your name, pay a salary to family members who are not employees of the company, or even pay personal expenses with the company's cashier.
Shareholders generally assign a certain amount of compensation or personal expenses in the form of a drawing from the business owners, in accordance with the terms of a shareholder agreement. However, problems arise when: a shareholder receives withdrawals from the company in excess of their fair share based on the ownership percentage; and when a shareholder does not accept those withdrawals in the form of a tie but spends them on the company's profit and loss statements. This reduces net income, which consequently reduces the profit to be shared based on ownership percentages, with the fraudster still receiving 100% of the benefit of the embezzled funds. Not only will this affect the cash flow available to each shareholder, but it will also unbalance the owners' capital accounts and equity.
Based on the shareholder relationship, one of them may suspect that something is wrong. Even if this does not happen, there are warning signs that can lead to mistrust: based on past performance, profits and cash decrease suddenly and unexpectedly; a sudden change in the behavior and general attitude of a partner; the partner becomes defensive when questioned about the company's financial state; the shareholder makes large personal purchases.
This understanding is essential for the problem to be remedied at the beginning, starting with gathering documents and evidence, such as: partnership agreements, including amendments; financial statements and accounting; tax returns and bank statements with copies of canceled checks and credit card statements. Before collecting this evidence, it is essential not to arouse suspicion with the investigated partner. Timely collection of documentation is important, so as not to give the other shareholder time to destroy or amend those documents.
Finally, it's also important that partners know how to deal with emotions. A shareholder dispute ranges from denial to sadness to anger. Keeping emotions under control during this difficult process certainly makes a difference.
Contact TATICCA — ALLINIAL GLOBAL, which provides integrated auditing, accounting, tax services, corporate finance, Financial Advisory, Risk Advisory, technology, business consulting and training. For more information, visit www.taticca.com.br or email taticca@taticca.com.br. Our company has professionals with extensive experience in the market and has certified methodologies for carrying out activities.
