Shareholder oppression occurs when the majority shareholders of a closely held corporationact in a way that is oppressive to the minority. Oppressed shareholder lawsuits may result in a forced sale or purchase of the stock of one or more of the owners, appointment of a receiver or other remedies available in a court action.
Shareholder Oppression Affects Minority Interests
If you are involved in a dispute that includes claims of improper behavior by the majority shareholders of a corporation, an experienced business divorce lawyer with a practice focused on shareholder disputes will assist you to protect your investment, and your rights. Jay McDaniel represents the owners of closely held corporations in cases involving claims of oppressive conduct.
The laws that determine the rights of LLC members vary widely by state. As experienced limited liability company disputes attorneys, we will help you understand your rights as a minority member or majority member of the LLC.
Contact the Business Divorce Lawyers at 973-602-3915 with your questions or concerns, or use our on-line form to arrange an initial consultation. There is no charge for our initial discussion and we will be happy to give you an overview of your options.
Jay McDaniel represents shareholders as plaintiffs or defendants in oppressed shareholder actions as part of its business divorce practice. We also represent the corporation when it is a party to the litigation.
Typical Shareholder Oppression Claims
The minority shareholder oppression lawsuit may include both management and financial issues.
- Minority shareholders are excluded from management decisions.
- Deadlock among the shareholders or the board of directors..
- Minority shareholders are fired and receive no dividends.
- Fraud or waste of corporate assets by the majority.
- Misappropriation of the corporation’s business or customers.
- Paying excessive compensation to the majority shareholders.
- Engaging in self-interested transactions, including mergers or sale of assets.
- Using the majority control to dilute the interests of minority shareholders.
- Failing to pay dividends.
- Selective purchases of the shares of insiders.
- Failing to provide ongoing information about the business, its operations, its finances and its shareholders.
Majority Interests in Shareholder Oppression lawsuits
Actions taken by the majority that frustrate the minority shareholders’ reasonable expectations, or which are damaging to the interests of the minority shareholders constitute minority shareholder oppression.
Not all minority shareholder claims are justified. The minority shareholder may use litigation as a tool to attempt to extract an unfair advantage or other financial benefits from the company.
Minority Shareholder Litigation
A court deciding an oppressed shareholder action can provide a number of remedies. These range from emergency injunctions to the forced sale of a shareholder’s stock to other shareholders or to the corporation.
The court can appoint a board member to break a deadlock, can appoint a receiver or other special master to manage the company or protect the shareholders’ interests.
Judicial Remedies in Oppressed Shareholder Litigation
The Court in a shareholder oppression case will often order the sale of a shareholder’s interest at fair value, and as part of the litigation will conduct an appraisal of the business owner’s interests. The fair value determination of the Court will set the compensation that will be paid to the selling shareholder.
In some cases the Court may order the dissolution of the business, meaning that the corporation will ultimately cease operations and the business will be sold. In the case of a judicial dissolution, the business may be sold as a going concern. Often the financial health of the business is a key concern in determining a remedy.
Contact the Business Divorce Lawyers at 973-602-3915 to have an experienced attorney consult with you on issued related to your rights as a shareholder of a closely held corporation.