Shareholder Disputes: Navigating Breakdowns In Trust And Confidence

Understanding Quasi-Partnerships in Shareholder Disputes

In shareholder disputes, the concept of a quasi-partnership plays a crucial role in determining how courts view the relationships between parties in closely held companies.

Ordinarily, companies are owned through shareholdings, and shareholders owe fiduciary duties to the company, rather than to each other. However, they often establish mutual obligations through agreements such as a Shareholders' Agreement.

In certain cases, the relationship between shareholders extends beyond mere ownership of shares. They may operate the business with mutual trust and confidence, akin to a traditional partnership—this is referred to as a quasi-partnership. Such relationships transcend the strict legal framework of corporate law, reflecting the reality that companies founded by family members or close friends should not always be governed like large multinational corporations.