Accountants are frequently the first advisers to notice that a business relationship is deteriorating. A disagreement over management decisions can become a dispute about ownership, access to records, company funds or the future of the enterprise.
1. Access to financial records becomes contentious
A shareholder or director who previously received management accounts may suddenly be denied access. The legal entitlement to information depends on the person’s role, the Corporations Act, the company’s constitution and any shareholders agreement. An accountant should avoid assuming every shareholder has identical inspection rights.
2. Director loans and related-party transactions are disputed
Amounts recorded as loans, drawings, distributions or expenses can become central to allegations of misconduct. Preserve contemporaneous ledgers, approvals, supporting documents and communications. The accounting classification does not by itself determine the legal character of a transaction.
3. Shareholders cannot agree on management or exit terms
Deadlock can disrupt banking, staffing and commercial decisions. Review the constitution and shareholders agreement for decision-making, transfer, valuation and dispute resolution provisions before assuming a forced sale or winding up is inevitable.
4. One side requests a retrospective change to the accounts
Requests to reclassify transactions during a dispute warrant particular care. Accounting professionals should maintain independence, document the basis for any correction and preserve earlier records rather than overwrite them.
5. The business’s solvency becomes uncertain
Cash-flow pressure, unpaid tax or creditor demands may create risks beyond the shareholder dispute. Directors should obtain appropriate legal and financial advice promptly, particularly where insolvent trading or restructuring options may arise.
What should an accountant do?
Identify the concern, preserve source documents, clarify whom the accounting practice acts for, avoid taking sides without proper authority and recommend independent legal advice where necessary. Accountants should not purport to determine contested legal rights or disclose confidential information without authority.
Specialist legal assistance
Mark Harley, Principal of Boss Lawyers, practises in commercial litigation and insolvency and served as a CPA Australia Disciplinary Tribunal Panel Member from January 2015 to February 2022. Boss Lawyers assists with substantial director and shareholder disputes and related litigation. Contact the firm to discuss whether a matter is suitable for assessment.
General information only, not legal advice. The outcome of any dispute depends on its facts and governing documents. CPA Australia has not endorsed this article.
