Shareholder Oppression: Four of the Most Common Violations of Minority Shareholder Rights
Minority shareholders are in a vulnerable position. By definition, they do not have much practical control over what will happen to the company―indeed, minority shareholders are forced to rely on the judgement, competence, and good faith of majority shareholders and corporate board members.
Unfortunately, in some cases, minority shareholders are mistreated by larger shareholders and/or executives of the company. If you are a minority shareholder involved in a dispute, you need to take immediate action to protect your rights and interests. Here are three of the most common violations of minority shareholder rights.
- Withholding Material Information
In Florida, the primary right that minority shareholders have is the ability to inspect the books and to obtain relevant information. One of the most common ways that minority shareholder rights are oppressed is through the improper and unjustifiable withholding of material information. Without this relevant information, it can be far more challenging for minority shareholders to protect their financial interests. If information is being withheld, you may need to call a lawyer.
- Refusing to Pay Out Profits/Dividends
Minority shareholders should not be unfairly denied their stake in the company’s earnings. To be clear, companies cannot necessarily be forced to pay out dividends. However, companies do generally have a basic duty to treat their shareholders in an equitable manner given their specific interests in the business. In some cases, the failure to pay out profits/dividends may be done in a manner the unjustly impacts minority shareholders. This could potentially be the basis of a shareholder oppression claim.
- An Attempted ‘Squeeze Out’
A ‘squeeze-out’ is a term that is used to refer to circumstances in which minority shareholders are literally (or practically) forced to sell their shares at a price that is significantly lower than fair market value. Squeeze-outs can occur in a wide range of different circumstances. Whether or not the underlying conduct of the other shareholders violates the law will depend on the specific nature of the case. Though, squeeze-outs may give rise to a minority shareholder oppression claim.
- Acts Against the Terms of the Shareholder Agreement
Finally, it is important to note that a minority shareholder’s rights are not only found in Florida—indeed, the basis of much of their rights and interests are located in a shareholders agreement. If you have a shareholders agreement, majority shareholders and other corporate insiders have a legal responsibility to abide by the terms of the agreement. If you believe that they have violated the shareholder agreement to your detriment, you should contact an attorney immediately.
Call Our West Palm Beach, FL Shareholder Dispute Lawyers Today
At Pike & Lustig, LLP, our West Palm Beach shareholder & partnership disputes attorneys represent minority shareholders in the full range of legal matters. If you believe that your shareholder rights were violated, we are ready to take action. For a confidential initial consultation, please call us now. From our offices in West Palm Beach and Miami, we handle shareholder disputes throughout South Florida.