Despite all your good-faith efforts to avoid a dispute between yourself and other shareholders, disputes still pop up from time-to-time. Shareholder disputes often stem from the power imbalance between majority and minority shareholders (those who collectively hold less than 50 percent of the company), violations of the shareholder agreement, and general clashes between shareholders over the direction of the company.
While majority shareholders have greater control over a company and its direction, minority shareholders do have rights. Majority shareholders in Florida are obligated to act in the best interest of the company; this is referred to as their “fiduciary duty.” A majority shareholder’s fiduciary duty includes not taking actions that benefit themselves while harming the financial wellbeing of the company. Under this umbrella of fiduciary duty, there are several common types of shareholder disputes that may occur.
Shareholder oppression is denoted as occurring when majority shareholders in a company take specific illegal actions that violate the rights and interests of the minority shareholders. One common way that minority shareholders are oppressed is by being denied their right to inspect the company’s finances. Other ways majority shareholders can oppress other shareholders is by attempting a squeeze out, which is when minority shareholders are compelled to sell their shares for an unfair price.
Shareholder Agreement Violations
A contract drafted during the beginning stages of a company is an effective tool for protecting the rights of all those who have an interest in the company. It is advisable to retain a business law attorney before everyone agrees to the shareholder agreement. At any rate, taking actions that run contrary to the terms laid out in the shareholder agreement could be grounds for legal action by minority shareholders.
Disagreement Over Direction of Company
While minority shareholders do have voting power in selecting board members for corporations, they are generally at the mercy of the majority shareholders. If the majority shareholders choose a direction for the company that is in violation of their fiduciary duty, then minority shareholders might be forced to pursue a lawsuit.
The potential for shareholder disputes is more common among companies that are not publicly traded, due to the lack of public shares that may be sold. While you might feel powerless as a minority shareholder, retaining an experienced and knowledgeable business law attorney can help level the playing field and protect your rights and interests in a company.
For legal help resolving your business dispute, get in touch with Bryant Taylor Law today at 954-282-9331 and get started with a free 15-minute phone call. Our firm will aggressively protect your rights as a minority shareholder in accordance with any shareholder agreements and Florida law.