What action should be taken when a minority investor is not paid a dividend?  Are you concerned about your rights as a minority shareholder and the adverse tactics of majority interests?  Dividends are simply the distribution of all or a portion of a corporation’s profits to its shareholders.  Profit that is not paid out to shareholders as a dividend is commonly reinvested in the corporation as “retained earnings.”  Nonpayment of dividends is a serious issue under the law.

However, there are cases where majority interests take unreasonable actions to deny a minority shareholder their rightful share of the profit.  There are several tactics used by corporate officers and majority interests to justify hostile actions such as when a minority investor is not paid a dividend.

You have rights as a minority shareholder.  The minority shareholder defense attorneys at the Watkins Firm bring more than 40 years of proven experience and a track record of success to your side of the equation.  We protect your interests and hold responsible parties accountable for their actions and financially responsible under the law.  We take a unique approach to resolving shareholder disputes such when dividends are not paid to you in a timely manner which is designed to resolve issues at hand in a timely and cost-effective manner.

We can also file a civil complaint for non-payment of dividends and seek financial damages for the non-payment of dividends.  There are several proven strategies which the experienced shareholder dispute resolution attorneys at the Watkins Firm can use to compel majority interests to uphold their responsibilities under the law.  You should be very cautious if you hear any discussion regarding a proposed merger, acquisition or the sale of your corporation.  Do not allow any sort of vote without seeking the advice of the Watkins Firm.  This may be an attempt to dilute the value and influence of your shares.

Pro-Tip: “what can we do as your attorney to help protect your interests as established in the shareholders agreement and your access to information? We like to say, ‘if it’s off a penny, it’s off a million.’ So we look at the financial disclosures you’ve given, and if they don’t add up or doesn’t seem straightforward, we suggest you demand for documentation. And if they don’t give it, that’s sort of like them pleading the fifth, you know, something’s wrong when they’re not willing to give their investors, their owners full access, full transparency into what’s going on with the company.

So that sense that you have that something’s just not right, that should also be a sense that maybe it’s time to get some help.  And you should do it right away. because, when shareholder fraud or a shareholder breach happens, it’s usually for a purpose. There is an opportunity for management.  It’s usually about a lot of money, and it’s usually happening now.

Controlling interests usually won’t do something like deny a shareholder a dividend unless it’s worth something. These cases are often about timing . If, let’s say you don’t have a shareholder agreement, or you have a weak shareholder agreement and management has broad discretion to do a lot of things, and they’re getting ready to do some questionable things, to make a big profit. And you come along and say, ‘wait a minute, I think something’s wrong here.’ And you pose an objection. Well, before you file a lawsuit, this opportunity that management has is still there. So if you are the squeaky wheel right away, before they go forward with whatever they’re doing, then you may profit from that. But if you’re not, then it’ll just happen. And instead of being able to share in the profits, you’ll be fighting to claim you had rights to get some money back.

What we are also describing what I would consider to be a conflict of interest between their obligation to their shareholders and their own personal interests. Everybody hears the term ‘conflict of interest’ and they think it’s something like special or amazing or complicated, but it’s really not. This is the oldest con game. For example, a person is working somewhere and gets access to checks coming in. They go form a company in another state, that sounds just like the name on the checks that are coming in. And they start taking those checks and putting them in their own bank account.

If you’re a corporation you’re in management and you have an uncle that forms a company and you start sending business that way, and before you know it, you’re taking assets from one company and giving it to another company, which technically you don’t have anything in writing as an ownership of, but you have a conflict of interest and you’re breaching your fiduciary duty. And so if the shareholders aren’t watching, these things happen, and I would say 20% of our litigation every month is based on shareholder disputes, fights between shareholders and the corporation and breach of fiduciary duty.

Fiduciary duty is an important element in these cases.  A fiduciary duty is basically the obligation to act in the best interests of those that they have a responsibility to. Because they have such an advantage. A breach of fiduciary duty, by definition, occurs when somebody has an advantage of knowledge of power of money over somebody else who’s invested in good faith, and the majority takes advantage of that.  The majority interest has a duty not just to do what the contracts say, but they have a duty to be a fiduciary, to take their position in favor of the shareholder and against themselves, if there is a conflict. So they have the utmost duty to disclose and to act in good faith for the interest of the shareholder.  That is why a breach of fiduciary duty is actually the essence of many of these cases.” – Dan Watkins, Founding Partner

If you are a minority shareholder with a dispute, or you are not sure what to do when dividends are not paid out to a minority investor as you expected 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.  Learn how the Watkins Firm will protect your interests as well as the strength and value of your position.