This webinar discusses resolving shareholder disputes. The panel of experts explores different types of shareholder disputes that can arise such as operational or managerial differences, financial disagreements, or perceived inequity. Common claims in shareholder disputes include breach of contract, breach of fiduciary duty, fraud, and self-dealing. Methods for resolving disputes include mediation, arbitration, litigation, and alternative remedies like compelling a buy-out. Standards of value and valuation approaches are important considerations when valuing a shareholder's interest. Proper buy-sell agreements and other contractual terms can help prevent and prepare for potential shareholder disputes.

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Practical and entertaining education for
attorneys, accountants, business owners and
executives, and investors.

4. Disclaimer
The material in this webinar is for informational purposes only. It should not be considered
legal, financial or other professional advice. You should consult with an attorney or other
appropriate professional to determine what may be best for your individual needs. While
Financial Poise™ takes reasonable steps to ensure that information it publishes is accurate,
Financial Poise™ makes no guaranty in this regard.
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5. Meet the Faculty
MODERATOR:
Max Stein - Boodell & Domanskis, LLC
PANELISTS:
Stephen Brodsky – Kaufman Dolowich Voluck LLP
John Levitske – Ankura Consulting Group, LLC
Michael Pakter – Gould & Pakter Associates LLP
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6. About This Webinar
Resolving Shareholder Disputes
When business owners come to the point where they simply can’t see eye to eye, success
can become unfeasible. Disputes between business owners can arise from any number of
issues and have varying impacts on the actual business, ranging from simple distraction to
total dissolution. Depending on the business and circumstance, the means for resolution may
or may not be provided for in the relevant by-laws or shareholder agreement. In this webinar,
the expert panel discusses different types of shareholder disputes and corresponding
remedies, including alternative dispute resolution, buy-sell agreement provisions, and share
valuation considerations.
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7. About This Series
Complex Financial Litigation
This webinar series focuses on the legal and financial realities that accompany unanticipated
adverse events, soured business relationships, and failing organizations. Whether you are a
general litigator, business owner, aspiring shareholder, or insurance claims analyst, this
webinar series will help you to understand and prioritize key concepts associated with
business breakups, shareholder disputes, claims for lost profits, and bankruptcy avoidance
actions.
Each Financial Poise Webinar is delivered in Plain English, understandable to investors, business owners, and
executives without much background in these areas, yet is of primary value to attorneys, accountants, and other
seasoned professionals. Each episode brings you into engaging, sometimes humorous, conversations designed to
entertain as it teaches. Each episode in the series is designed to be viewed independently of the other episodes so that
participants will enhance their knowledge of this area whether they attend one, some, or all episodes.
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8. Episodes in this Series
#1: Common Issues and Strategies in Business Breakups
Premiere date: 2/24/21
#2: Nuts & Bolts of Lost Profit Cases
Premiere date: 3/24/21
#3: Resolving Shareholder Disputes
Premiere date: 4/21/21
#4: Defending Against Bankruptcy Avoidance Actions
Premiere date: 5/19/21
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9. Episode #3
Resolving Shareholder Disputes
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10. Reasons for Shareholder Disputes
 Operational or Managerial Differences
 Shareholders may disagree on vision or direction of the company.
 Shareholders may disagree on business strategy.
 Differing Personalities
 Shareholders may not have personalities that work well together.
 Differences in risk tolerance.
 Financial
 A company may be struggling or growing rapidly, causing disagreements.
 Excessive and/or inequitable compensation structure.
 Perceived Inequity
 Perception that compensation, responsibilities, or dedication/involvement in the
business is not equal.
 Disagreements regarding adding people to the business.

11. Types of Claims Arising Out Of Shareholder Disputes
 Breach of Contract
 A breach of contract is a failure to perform the terms of a contract to the extent
that it renders the agreement "irreparably broken" and defeats the purpose of
making the contract in the first place. The breach must go to the very root of the
agreement between the parties.
 Breach of Fiduciary Duty
 A breach of duty occurs when one person or company has a duty, but fails to
perform the duty.
 Can be intentional or negligent if the breach caused another person’s injuries.
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12. Reasons for Shareholder Disputes
 Fraud
 An intentional misrepresentation of material existing fact made by one person to
another with knowledge of its falsity and for the purpose of inducing the other
person to act, and upon which the other person relies with resulting injury or
damage.
 Self-dealing
 Someone who owes a duty takes advantage of his or her position in a transaction
and acting for his or her own interests rather than for the interests of the
shareholders of the company.

13. Majority Control
• Commonly leads to claims of:
 Oppression
 Self-dealing, misappropriation
 Risks of conventional corporate law norms
 Centralized control in board
 Majority control in voting directors
 May take actions detrimental to minority

14. Shareholder Oppression
 Squeeze-out or freeze outs
 Exclusion from profits
 Lack of dividend policy or declaration
 Lack of profitability due to excessive director fees, officers’ compensation,
bonuses
 Terminating employment
 Involuntary removal from director or officer position
 Diminish voting powers
 Deny access to information or documents

15. Resolving Shareholder Disputes
 Mediation
 Arbitration
 Litigation
 Alternative Remedies

16. Mediation
 Settlement discussions guided by expert.
 Pros and Cons:
 Vary depending on jurisdiction
 Third-party mediator may have more experience in particular industry
 May better allow parties to maintain a relationship after the resolution
 Cost
 Time
 Outcome is not enforceable except if reduced to agreement
 Mediator does not render a decision of any kind

17. Arbitration
 Adversarial mechanism where dispute decided by third part(ies).
 Pros and Cons:
 Again, Arbitrator may have more experience in particular industry
 Decision is binding between parties and enforceable (if reduced to judgment in
court)
 Cost/time benefit
 Procedures what parties agree to – streamlined procedures (less due process) –
less fairness v. cost and time savings
 Decision may be “unfair” to one party
 Decision may not be appealed

18. Litigation
 Formal Dispute Resolution Process
 Pros and Cons:
 Enforceable
 Due Process = fairness to all
 Seeks the most equitable outcome
 Decision may be appealed
 Time consuming process
 Public -- May damage goodwill and image of company

19. Alternative Mechanisms
 Compel buy-out
 Appoint provisional directors
 Appoint custodian
 Other equitable remedies
 Dissolution rare

20. Thinking Ahead: Dealing with Potential Friction with
Contract Terms
 Contractual agreements when times are good and easy:
 Incorporation Agreements
 Operating Agreements
 Buy-Sell Agreements
 Shareholder Agreements
 Partnership Agreements

21. Thinking Ahead - Prophylactic Contractual Terms
 Contract terms addressing:
 Death
 Divorce
 Disability
 Shareholder Dissention
 Corporate Dissolution
 Shareholder Retirement
 Bankruptcy
 Decline of Market

22. Thinking Ahead - Prophylactic Contractual Terms
 Anti-squeeze-outs provisions:
 Non-competes
 Employment contracts
 Breach of duty provisions
 Dividend triggers
 Supermajority provisions
 Provision that commits board to specific course of action

23. Thinking Ahead - Prophylactic Contractual Terms
 Sufficient funding vehicles where appropriate
 Life insurance
 Key man
 Disability
 Other quickly liquid asset
 Arbitration provision (or absence of provision)
 Venue and choice of law clauses

24. Standards of Value
 Fair Market Value
 The price at which an asset would change hands between a willing buyer and a
willing seller when the former is not under any compulsion to buy and the latter is
not under any compulsion to sell, both parties are able, as well as willing, to trade
and are well informed about the asset and the market for that asset.
 Fair Value
 Generally, the amount for which an asset could be exchanged between
knowledgeable, willing parties in an arm’s-length transaction.

25. Standards of Value
 Book Value
 Essentially, the company’s net assets less its net liabilities, as stated on the
company’s financial statements.
 “Value”
 A generic term sometimes used in buy-sell agreements or shareholder
agreements that is meant to describe a standard of value to be applied.
 The meaning may or may not be clear in definition or description for a valuation
analyst to understand its application.
 May be a term to describe an agreement’s stated formula for valuing shares.

26. Valuation Approaches and Methods
 Income Approach (going concern)
 Discounted Cash Flow (DCF) Method
 Capitalization of Earnings Method
 Asset Approach (ex. holding company or unprofitable company)
 Adjusted Book Value Method
 Excess Earnings Method (hybrid income/asset approach)
 Market Approach (sometimes used as a sanity check)
 Market Transaction Method (private transactions)
 Guideline Publicly-Traded Company Method (public transactions)

27. How a Valuation Professional Can Help
 Objective, third-party opinion
 Based on recognized valuation theory and methodology
 Considers whether valuation discounts or premiums are available

28. Considerations for establishing valuation methods.
 Funded, reasonable vehicle for transfer of ownership and wealth
 Specified date of trigger, “as of” date
 Valuation formulas that may materially distort the value of the subject equity
interest
 Consult with an experienced valuation professional to construct the Agreement
to ensure all issues are addressed
 Update Agreement with advisors and shareholders to ensure

29. About the Faculty
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30. About The Faculty
Max Stein - MStein@boodlaw.com
Max Stein, a member of Boodell & Domanskis, LLC, is a business litigator focused on
meeting clients’ business objectives, helping them resolve disputes at the most opportune
times. Max represents clients as both plaintiffs and defendants in a wide variety of forums.
Additionally, Max notes that one advantage of practicing at a smaller firm, is that he is able to
offer his clients high-quality, nimble representation at reasonable rates. To aid his clients in
achieving their business objectives, Max approaches cases as though they will go to trial,
utilizing his extensive trial experience. Max also counsels his clients, helping to identify and
navigate legal risks to achieve their business goals and protect their competitive interests
while managing and, where possible, avoiding the expense and uncertainty of litigation.
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31. About The Faculty
Michael D. Pakter - mpakter@litcpa.com
Mr. Pakter focuses on financial analysis, forensic accounting, economic damages, valuation issues and
investigations. He has experience in financial forensics, determining lost profits, business interruption
claims, earn-outs, analyzing financial transactions and balances, establishing fair value and
reconstructing incomplete, misstated and/or falsified financial information. Mr. Pakter provides consulting
and litigation support services to trial lawyers, trustees, examiners, receivers, business owners and
managers and units of federal, state and local government. He has experience with disputed financial
transactions in commercial litigation, conducting investigations, examining financial transactions and
balances, Court-ordered accounting and bankruptcy core proceedings. Mr. Pakter has more than 35
years of experience in accounting, financial analysis, financial forensics and investigations, including
more than 15 years of experience in economic damages and business valuations. He has participated in
public hearings and alternative dispute resolutions, submitted expert reports in several jurisdictions and
testified in arbitrations, regulatory proceedings and State, Federal and Bankruptcy Courts. Courts and
arbitral bodies have recognized him as an expert in accounting, business valuation, financial analysis,
economic damages and business economics.
To read more, go to; https://www.financialpoise.com/webinar-faculty/michael-pakter/
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32. About The Faculty
John Levitske - John.Levitske@ankura.com
John Levitske, CPA/ABV/CFF/CGMA, ASA, CFA, CFLC, CIRA, MBA JD serves as a business valuation,
forensic accounting and damages expert witness, arbitrator, and advisor. He provides business valuation,
forensic accounting, purchase price analysis, damage quantification, and dispute resolution services in complex
commercial situations. He testifies as an independent expert witness in disputes, both domestic litigation and
international arbitration, regarding issues of valuation, finance, accounting (e.g., GAAP) or damages. He also
acts as a neutral expert determiner or neutral arbitrator and advises clients in mediations and negotiations. He is
frequently consulted regarding business disputes, shareholder disputes, M&A transaction disputes and
bankruptcy. He has over 30 years of experience, with 25 years of Big Four public accounting and international
consulting firm experience. John works across all industries. His expert work includes jury and bench trials,
mediations, and arbitrations (e.g., LCAI, ICC, SCC, AAA, JAMS, FINRA, and ad hoc). He is a Senior Managing
Director in the Disputes & Economics practice of Ankura Consulting, based in Chicago. Previously, he served as
one of the leaders of Duff & Phelps’ post-M&A dispute practice, KPMG’s post- acquisition dispute practice and
its agreement vetting services practice, and Deloitte’s Eastern Great Lakes valuation practice.
To read more, go to https://www.financialpoise.com/webinar-faculty/john-levitske/
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33. About The Faculty
Stephen Brodsky - sbrodsky@kdvlaw.com
Stephen L. Brodsky is a Partner of Kaufman Dolowich & Voluck, LLP and practices out of the
firm’s New York City and Long Island offices. Stephen has practiced complex commercial
litigation for more than twenty years. He has a broad practice, and his clients span industries.
Over his career, he has litigated significant, high-dollar matters in federal and state courts
across the United States. He has argued at the trial and appellate levels and served as trial
counsel in both bench and jury trials. Stephen also represents his clients in arbitrations,
mediation and administrative proceedings. Finally, he resolves his clients’ disputes by direct
negotiations and without formal litigation. Stephen is known for his creative problem solving
and thoughtful advocacy. He is rated AV Preeminent by his clients, peers and opposing
counsel, the highest professional rating.
To read more, go to https://www.financialpoise.com/webinar-faculty/stephen-l-brodsky/
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34. Questions or Comments?
If you have any questions about this webinar that you did not get to ask during the live
premiere, or if you are watching this webinar On Demand, please do not hesitate to email us
at info@financialpoise.com with any questions or comments you may have. Please include
the name of the webinar in your email and we will do our best to provide a timely response.
IMPORTANT NOTE: The material in this presentation is for general educational purposes
only. It has been prepared primarily for attorneys and accountants for use in the pursuit of
their continuing legal education and continuing professional education.
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35. About Financial Poise
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