Minority shareholders often face issues related to oppression or violation of minority rights. Competent commercial lawyers can help you resolve problems and assert your lawful rights in the company. In any business or company, the directors, officers and majority shareholders have a duty to work for the best interests of all shareholders (a minority shareholder is an individual who owns less than 50% stock in a company). An important component of this duty is to ensure that minority shareholder rights are not violated. For example, employees of a company who are also minority shareholders can be terminated from employment (just like other employees). However, in the absence of a shareholder agreement, the matter is usually debated in court and may take a longer time to resolve.
The court will then examine the circumstances and balance the duties of the majority shareholders against the claim of the minority shareholders. The process is not only complex, time consuming and tedious but also involves steep legal costs. Minority shareholders typically face a set of common problems which include but are not restricted to:
- Non receipt of profits or share dividends that you are entitled to: The details of share price evaluations etc is usually described in detail in the shareholders’ agreement.
- You may not have received accurate information or any information regarding major sales of assets etc. According to the shareholders’ agreement, all shareholders should be informed of positive as well as negative information about the company.
- The majority shareholders have taken actions that benefit a certain group of shareholders at the expense of other shareholders
- Diversion of business to other enterprises in which majority shareholders have a stake
Overall, companies and businesses are expected to be fair and just in their handling and operation of the business. If you feel that your rights as a minority shareholder have been violated, you can consider seeking legal assistance from experienced business lawyers. They will strive hard to get the company to buy your shares at a fair price (this is the most common outcome of violation of minority shareholder rights).
Protracted shareholder disputes or litigation not only impacts the day-to-day running of the business but also affects personal wellbeing. Delay in corrective action and seeking legal counsel will only result in strained relationships. In reality, minority shareholders have very little say in company matters. However, they can take action under certain circumstances.
The good news is that most of these matters can be resolved in a proactive and harmonious manner among the members. It’s also advisable to consider external mediation to help understand your rights and responsibilities. In general, the rights of minority shareholders should not be subject to the whims and fancies of majority shareholders.