Protecting Your Rights and Interests in Minority Shareholder Disputes
There are many reasons why minority shareholder disputes arise with majority shareholders or the executives and Board of Directors of a corporation. Minority shareholder disputes may concern everything from access to important corporate information to the direction of the corporation or the distribution of profits. Those who hold the majority interest in the corporation often tend to take seemingly arbitrary actions which are designed to marginalize or damage the interests of minority shareholders.
Shareholder’s rights must be asserted and protected. After more than 40 years of experience the minority shareholder attorneys at the Watkins Firm can tell you that actions are often required to gain the attention of abuse majority interests in order to influence them to change their ways.
This doesn’t have to result in a lawsuit. In fact, in the majority of shareholder dispute cases the Watkins Firm is able to resolve the matter through effective, leveraged negotiation. This is the fastest and least expensive option to assert and protect your rights as a shareholder or investor.
Shareholder Rights
There are several strategies majority shareholders may attempt in order to take advantage of their position against the interests of minority shareholders. This is often referred to as “shareholder oppression.” Shareholder oppression is most common in closely-held corporations, but it has been known to occur in larger corporations, often through the actions of a Board of Directors or the executive management team.
Shareholder oppression is not specifically recognized under California law, however, we have strong laws of our own to protect minority interests. This generally involves tactics designed to marginalize or eliminate the influence of a minority interest or to unfairly manipulate their share of corporate profit. Limiting access or failure to provide corporate and financial information often results in tension between the parties which ultimately results in open hostility as harassment and oppression take more obvious forms. Examples of valid minority shareholder issues include but are not limited to:
- Refusal to give a minority shareholder access to the books or other shareholder information
- Locking a minority shareholder out of the premises
- Failure to declare a dividend
- Majority shareholders or corporate leaders passing salary increases or other compensation which is out or proportion to the industry or the actual work being performed
- Majority shareholders approve a merger with a new corporation (which they own), and the shares of the existing company are bought out as part of the transaction. This poorly veiled strategy attempts to force the minority shareholders to take a cash payment which is far less than the value of their shares as compensation for forcing them out of the “new” company
Majority interests may attempt to freeze out a minority shareholder to avoid distribution of profit or in an attempt to pressure them to sell their interest in the corporation. These tactics can be quite subtle, or they may be overt including a refusal to declare and distribute dividends and even the termination of a minority shareholder. If you have a minority interest in a corporation and believe you are not receiving your payments, rights or access or are concerned about the direction of the organization you need the experienced shareholder’s rights attorneys at the Watkins Firm to assert your rights and protect their interests.
Minority Shareholders Have Rights Even If the Corporation Was Formed in Another State
Minority shareholders have specific rights provided by California law. Even if the corporation was formed under the laws of another state, if it is a California business the minority shareholders have protections under our state laws. The Watkins Firm provides options for our minority shareholder clients. We will put the majority interest and corporate management on notice and assert your rights. We take a unique approach to business disputes such as minority shareholder oppression which are designed to resolve the challenge in a timely and cost-efficient manner.
Contact a Law Firm Who Will Protect Your Interests and Assert Your Rights
What do you want to accomplish? The Watkins Firm develops and implements the right strategy based upon the goals of our clients. We will work to ensure you have access to the books and the information needed to protect your interests. We are often able to negotiate a resolution to minority shareholder disputes or force a favorable buy-out of your interest in the corporation.
Minority shareholders may bring a derivative lawsuit or action against the majority stockholders on behalf of the corporation itself. Depending on the voting percentages, the shareholders may simply decide to voluntarily dissolve the corporation and divide the remaining profits and assets.
Finally, the minority shareholders may need to file a lawsuit to force the “involuntary dissolution” of the company in the event of fraud, poor management or abuse of the powers of majority shareholders. The experienced shareholder dispute attorneys at the Watkins Firm provide sound counsel and advice on the best strategy to accomplish your goals and objectives.
We invite you to review the recommendations of our clients and review our podcast episode 14 – Shareholders’ Rights and Disputes as well as the strong recommendations of former clients and contact us or call 858-535-1511 for a free consultation. We will help to put a stop to shareholder oppression, resolve minority shareholder disputes and protect your rights and interests while seeking the best possible outcome for your unique circumstances.