Are you searching for attorneys with proven experience and strategies to protect the rights of a minority shareholder or investor in San Diego or anywhere in California?  There are many reasons why minority shareholders experience challenges and ultimately shareholder disputes with majority interests or other shareholders.  Some of the primary reasons include, but are not limited to:

1. Limitations on access to the books or corporate records
2. Freeze outs
3. Shareholder intimidation
4. Failure to declare a dividend
5. Questions regarding management/executive compensation
6. Sale of the company or merger with a new corporation

The common thread among these minority shareholder disputes is an attempt by the majority interest to minimize or eliminate the influence of minority shareholders and to affect unfair distribution of profits.  The resulting tension between the parties often erupts into an open argument and ultimately shareholder disputes and litigation.  This is why it is important to work with a proven law firm who can protect the rights of a minority shareholder and the investment(s) they’ve made.

The Watkins Firm has decades of experience and takes a unique approach to protect the rights of a minority shareholder, and resolve a minority shareholder dispute in San Diego or anywhere in California quickly and efficiently.  We work to protect our client’s interests and hold majority shareholders accountable to applicable commercial and corporate law.  Fortunately, California provides specific rights to minority interests, even if the corporation was formed under the laws of another US state.

Shareholders rights attorneys at the Watkins Firm serve notice to majority interests and corporate executives, directors and managers asserting our client’s rights.  We work with our clients to develop specific strategies for their unique circumstances based upon their own unique goals and objectives.  We work to gain crucial access to the premises, the books and important corporate documents.  We negotiate resolutions to disputes and apply a unique approach which is designed to resolve minority shareholder disputes in a timely and cost-efficient manner.  When necessary we can work to negotiate a favorable buy-out of our client’s position, or file a derivative lawsuit to correct mismanagement or malfeasance.

Pro-Tip: “…depending on how much they own, how much, what percentage of the company they own, shareholders have a general right, to see the financial disclosures the company gets, if they’re less than 5% shareholder. And if they’re more than 5% shareholder, they can go audit the company’s books and records. And sometimes they’ll be told they have to sign a non-disclosure agreement to do so, but they can literally give notice and appear in two weeks at the company offices and start making copies or investigating what’s going on with the company. Or if that doesn’t happen, they can literally file a motion in court and have a judge order. They’d be given access to the books and records of the company.

There protections from minority shareholders against wrongful actions, by the majority interest or officers and directors.  There’s laws in place that protect them. But unless they have some type of shareholder agreement or some type of assurances or representations and warranties, then they just have the right to grievance in court.

For example, we’ve had so many shareholder fights where a company group of friends or a group of friends who know friends, maybe 30 people invest in a company and it’ll be doing well, but not great. And these investors, the shareholders won’t be receiving disclosures, or they will be receiving them, but they sort of don’t add up. And then they do an investigation and they come to some law firm like ours and they say, well, let’s get in there and see the books and records, and you get some pushback from the company. And that’s when all the hairs in your neck stand up and you come to the Watkins firm and we file a motion.

And we discover through our due diligence that the company’s doing very good and that they also formed an offshore corporation of the same name. And they’ve taken all the assets and they’re all driving Rolls-Royces. So this has happened more times than I can say, because it just does happen. Nobody fights over anything unless there’s money involved. If it’s just doing okay, they would tell the truth and say, it’s all great. But if that big money offer comes in the door and they have a way of, of keeping it for themselves, it’s very tempting for human nature to turn that down.

Obviously not all shareholders need legal advice, but many of them do. If you’re making a substantial investment in a company, you are a buyer of that company. So all the same thought process that we go through when we acquire a company or we sell a company and we do our due diligence should come into play. And law firms have resources that average people don’t. We have computer databases, we can do background searches, we can pull up or request disclosures. We can actually help you ask certain questions of the corporation. And if it adds up, we can literally even hire our CPA to review the financial documents to make sure it adds up. For example, there’s something called EBITDA. Now your average person doesn’t know what EBITDA is, but a business broker, a lawyer or a CPA will know that that’s what we judge the profitability of a company on.

And let’s say normally the company’s worth four times EBITDA. The company makes a hundred thousand dollars a year. It’s worth $400,000. You come along and you are going to buy 5% of the company and you offer $200,000. If you had gone to a lawyer, we would say, you’re, you’re overpaying just from the accounting point of view. And you might want to do some further due diligence to see why the price is set so high. And then you can have us discover how much does the president of the company make? How much does the vice president of the company make? What are they spending profits on? That’s a big one. You’ll invest in a company it’s doing great, but somehow it never says it’s making the money that it should because the people who control the corporation have the right to pay their key employees, whatever they want. And usually that’s a million dollars a year for the president. If the company makes that much money when they were making a hundred thousand dollars a year. So there’s all kinds of financial considerations, accounting considerations, and disclosures, you should consider. And so spending $2,000 or $3,000 on your lawyer before you spend $50,000 or $200,000 on an investment is a definitely a must thing to do.” – Dan Watkins, Founding Partner

If you are searching for a proven legal partner with the experience and proven legal skill to protect the rights of a minority shareholder or investor in San Diego or anywhere in California 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.