I would like to share with you a story about minority shareholder rights that I learned from the father of a childhood friend of mine. My friend’s father was involved in various business activities in the Houston area. During the late 80’s I recall being on the sideline of a conversation my friend was having with his father in which the father was describing being squeezed out of his minority shareholder rights in a particular business.
I had come in on the tail end of the conversation, and, in an effort to get caught up with the story, I asked, “what happened?” I will never forget the visual that my friend’s father gave me. With his right hand making the thumbs up sign he then turned his thumb upside down, placed it on the table and began rotating his fist back and forth as if he was squishing a bug underneath. Then he said, “that’s what happened.” I understood.
(If you feel that your minority shareholder rights are in jeopardy and you would like to discuss your options, please call the attorneys at Romano & Sumner, LLC.)
Minority shareholder oppression can take many forms. Here are some of the most common scenarios in which minority shareholder rights are taken advantage of by the majority:
- Terminating the minority shareholder’s employment without cause;
- Removing the minority shareholder from the board of directors;
- Removing the minority shareholder from management;
- Refusing to declare dividends when the company is profitable;
- Denying the minority shareholder access to information;
- Siphoning off earnings to the majority shareholder through de facto dividends or excessive compensation;
- Entering into favorable contracts with affiliates of the majority shareholder;
- Engaging in recapitalizations or mergers designed to dilute or eliminate the minority shareholder’s interest;
- Usurping corporate opportunities;
- Using corporate assets for personal benefit; and/or
- Making loans to family members.
If you find yourself in one of the situations described above, know that with proper legal representation you can protect your minority shareholder rights in Texas. Some of the remedies for minority shareholder oppression in Texas include the following:
- Liquidation of the business entity;
- Court ordered buyout of the minority shareholder’s interest by the majority;
- Reinstatement of minority shareholder to the board of directors;
- Altering or setting aside an action of the corporation, its shareholders or directors;
- Cancelling a provision in the articles of incorporation or by-laws;
- Ordering payment of dividends;
- Appointing a custodian to manage the business;
- Appointing an individual to be an officer or director, or a provisional officer/director;
- Removing a director or officer from office;
- Ordering an accounting;
- Awarding damages;
- Reinstating the minority as an employee;
- Requiring repayment of sums wrongly siphoned from the corporation;
- Limiting the salary of the majority or defining certain amounts of compensation as an constructive dividend;
- Ordering issued stock to be cancelled or redeemed; and/or
- Permitting the minority to purchase additional shares.
The business litigation attorneys at Romano & Sumner, LLC are experienced in prosecuting claims for minority shareholder oppression in Texas. To protect your minority shareholder rights in Texas, call the attorneys at Romano & Sumner, LLC today.