Failure to disclose information can result in a minority shareholder dispute in California.  The failure of a business partner, executive, Board of Directors or fellow owner to provide important information is often the source of a costly minority shareholder’s dispute.

What steps should you take if you are not receiving timely reports, complete information or if you are concerned about the lack of information provided to you by a partner or fellow owner in your business?  Are you able to access the books and corporate records of the business?

Business owners and officers have specific responsibilities established by the bylaws and shareholder’s agreement and other business contracts developed when the company was started or added and updated along the way.  Each owner, shareholder or executive manager has specific obligations to investors, business partners and other owners of the business.  Failure to disclose important information can result in a minority shareholder dispute here in San Diego and across California, leading to serious legal and financial exposure for the underlying corporation.

These types of disagreements and issues involving our clients who are minority shareholders can extend to all members of the executive management team.  It can be challenging to unite behind a singular vision for how a company should be run and which decisions should be taken along the way.

However, when the disagreement extends beyond philosophical differences to the point where information is being withheld or reported in an inaccurate or incomplete manner, legal liabilities arise and it is time to discuss the situation with the experienced San Diego corporate attorneys at the Watkins Firm.

Pro-Tip: “Two important terms: Arm’s-length, and good faith. This goes back to, two terms. One is an arm’s-length transaction, meaning that I’m over here and you’re over there and you have an obligation to do things for you. And I have an obligation to do things for me and buyer or beware caveat emptor. So it’s not a term of protection. So to speak what it is, is a term that says, this is an arms length transaction. We’re both on equal footing. And therefore I don’t have a real fiduciary duty to you. And you’ll see that in the boiler plane, in a lot of agreements, even though someone does have an advantage and it is not a arms length transaction, they’ll put it in there and say, yes, it is. And you agree that this is an arms length transaction, and that you’ve been told everything you need to know about this deal. And then you sign up and they turned out to be, ready to steal from you all along.

Unfortunately, corporations are a great source of theft and fraud. Well, the greatest, the greatest source I know.  Well, let me give you an example. There’s 10 shareholders in a company and they’re not getting along and they’re fighting. So the majority says, okay, it’s not working. We’re going to sell the company for one 10th of what it’s worth. And then without you knowing about it, you find out two years later that four of the six majority members took jobs in employment with that new company, you’ve just been squeezed out of all your access by votes and by agreements and by people breaching their fiduciary duty.

Whereas a “freeze out” is just that, and it happens a lot. You got management thinking they have the right to do this and that, and you have this angry minority shareholder over here. And finally, they just say, don’t give them any more documents. Don’t let, them come to any more meetings and don’t pay them any dividends and just ignore them. Change the locks, fire them, terminate their employment, do all these things and say, go ahead, Sue me. And we do. And we win!” – Dan Watkins, Founding Partner

We have served the San Diego and California business community including investors and shareholders for more than four decades.  While the failure to disclose accurate information can result in a minority shareholder dispute in California, our work can quickly diffuse an otherwise volatile situation.  We are prepared to help negotiate and resolve the situation, or take more aggressive and assertive legal action when necessary to protect your rights, interests and money.

We invite you to review our podcast Episode 14 – Shareholders’ Rights as well as the strong recommendations of our clients and contact the Watkins Firm or call 858-535-1511 for a complimentary consultation today.