Florida Law: Corporations Prohibited from Amending Bylaws to Undermine a Shareholder’s Contractual Rights
Minority shareholders are in an inherently vulnerable position. By definition, they lack the power to exert direct control over the company. Minority shareholders must put a significant amount of trust into the hands of a corporation’s board of directors. Shareholders also have some important legal protections. Florida law prohibits a corporation from amending its bylaws to undermine the contractual rights of a shareholder. Here, our Miami shareholder disputes attorneys discuss the key things to know about Florida’s legal protections for a shareholder’s contract rights.
What are Corporate Bylaws?
A corporation’s bylaws are a set of written rules and procedures that companies use to organize internal operations. Essentially, the bylaws clarify how exactly a corporation operates—clarifying the rights and duties of director, corporate officers, and the shareholders. Put another way, a corporation’s bylaws are its governing documents. Bylaws are not set in stone. Indeed, most companies will have a procedure in place to amend the bylaws when necessary.
Case Example: First Florida Bank, N.A. v. Financial Transaction Systems
To protect the rights and interests of minority shareholders, Florida law prevents corporations from amending bylaws for the sole purpose of undermining a shareholder’s contractual rights. The case of First Florida Bank, N.A. v. Financial Transaction Systems provides a useful example of how exactly the law works.
The dispute centered around Financial Transaction Systems and its attempt to change internal bylaws in a manner that would result in a higher fee for First Florida Bank (a shareholder). In reviewing the matter, a Florida appeals court prevented Financial Transaction Systems from amending its bylaws on the grounds that doing so would improperly and retroactively “amend the parties’ original agreement” in a manner that deprived the shareholder of “its vested contractual rights.”
Bottom Line: The key takeaway for minority shareholders in Florida is that the initial shareholder agreement provides important legal protections. Corporations are restricted from changing the rules—amending the bylaws—in a manner that would invalidate those contract rights.
Be Proactive: Protect Your Rights as a Shareholder
Although a minority shareholder is an owner of a corporation, they have limited actual control over it. If you believe that your shareholder rights were violated, it is imperative that you take immediate action. You may have options available under Florida law. As these are notoriously complicated cases, it is highly recommended that you consult with a qualified attorney immediately.
Call Our Miami, FL Shareholder Rights Attorneys for Guidance and Support
At Pike & Lustig, LLP, our Florida shareholder dispute lawyers are focused on solving problems and protecting the rights of our clients. If you are a minority shareholder and you believe your contractual rights were violated, we are ready to get started on your case. Call us now for a confidential initial case evaluation. From our office locations in Miami and West Palm Beach, our law firm represents clients in shareholder disputes throughout South Florida.