Updated: May 2, 2022
If you’re a minority shareholder in a closely held corporation and you feel your input has gone unconsidered, or outright ignored, you may be a victim of Minority Shareholder Oppression. In closely held corporations, those who control enough shares to make the decisions for the company are named controlling shareholders. As the name suggests, these shareholders essentially have control over the company.
What’s important to keep in mind is the minority shareholders (everyone else) still need to have their inputs weighed. In cases of shareholder oppression, controlling shareholders may ignore the views of minority shareholders and act only in their self-interest, not the interests of the company as a whole. In severe and blatant cases, the majority shareholders may even deny access to company records, preventing minority shareholders from accessing financial information or necessary records to protect their rights as shareholders.
What Can I Do as a Minority Shareholder?
It’s critical to know your rights as a minority shareholder. The first place you should check is the company’s shareholder agreement. The company should have created this as part of their articles of incorporation, and it details how situations where shareholders’ views conflict should be handled. It also specifies what you’re allowed to do with your shares and your rights as a shareholder.
Consulting the shareholder agreement will hopefully clear up what actions you have available to you, but if it doesn’t, or one does not exist, you should consult legal counsel. The shareholder agreement exists to protect your rights as a shareholder, and without one, your options can become limited.
What Legal Options Do I Have?
If you feel your position as a minority shareholder is being abused, legal action may be a necessary next step. The courts have the power to correct cases of minority shareholder oppression, such as holding the corporation liable for their fiduciary responsibilities or forcing a buyout of the minority shares. In extreme circumstances, the court may consider dissolving the business and distributing payouts to shareholders accordingly.
Business divorce is an option if you feel that reconciliation is off the table, but it isn’t always necessary. If your case is headed to the courts, working with an experienced firm can make or break the battle for your rights as a shareholder. The Glendale business attorneys Monahan Law Firm have the experience necessary to ensure your case is handled properly and get you the results you need. To schedule a consultation, call us at (623) 385-3190 today.