Houston Real Estate and Business Law Firm

Shareholder Oppression

Shareholder Oppression Lawyer in Houston, Texas

Individuals who invest in and buy stock in a company make every effort to protect their investment. Similarly, the company's board and management make daily business choices based on reasonable judgment. Although this symbiotic connection appears to work well in theory, conflicts sometimes arise in practice.

Shareholder conflicts and disagreements between members of limited liability organizations, or LLCs, are among the most contentious instances in this industry. Shareholder conflicts can take a variety of forms.

Some shareholders or members, for example, may discover that their ownership in the firm has been unfairly diminished. Another typical conflict arises when minority shareholders claim that majority stockholders are paid excessively high salaries or bonuses. Disagreements might also occur if profit shares are not divided appropriately. Minority shareholder persecution is at the root of many of these conflicts.

If you feel you are a minority shareholder or a member of an LLC being oppressed by a majority shareholder. In that case, our skilled shareholder oppression lawyer can help you get legal aid and achieve a solution. GK Law's experienced shareholder oppression lawyer has a strong history in corporate law and resolving conflicts between business owners.

We are here to give you competent advice and assist you in obtaining the remedy to which you are entitled, whether you are a small company owner or a majority stakeholder in a corporation. You may better comprehend your existing condition, create a clear goal, and take action by hiring an experienced shareholder oppression lawyer. Make an appointment for your introductory consultation now.

What is Shareholder Oppression?

shareholder oppression lawyer

A minority shareholder in a Texas-based company is someone who does not own enough of the company to have the authority to operate the corporation, LLC, or other business organization.

On the other hand, major shareholders own and control the majority of a firm's shares and have a sufficient stake in the company.

As a result, compared to their majority shareholder counterparts, minority shareholders have less power.

Shareholder oppression happens when a company's majority shareholders or managing members adopt acts that unfairly disadvantage the company's minority shareholders. More precisely, when a majority of shareholders or LLC members join together to disenfranchise them somehow.

In non-publicly traded corporations, minority shareholder oppression is most widespread; the lack of a public market for shares only adds to a minority shareholder's susceptibility.

What Are Examples of Shareholder Oppression?

Even though shareholder oppression is a broad concept encompassing a wide range of majority shareholder activities, there are a few prevalent kinds. The following are examples of shareholder oppression:

  • "Freezing out" the minority shareholder by leaving them out of important decisions or otherwise excluding them from a meaningful role
  • "Squeezing out" the minority shareholder by forcing the minority shareholder to sell their shares for less than they are worth
  • Attempting to dilute the minority shareholder's voting rights
  • Denying minority shareholders access to financial records
  • Refusing to pay dividends to minority shareholders

Minority shareholders that are subjected to oppressive behavior by majority shareholders are not always able to end the tyranny readily. It is due in part to the way Texas law handles shareholder oppression.

What Are the Rights of a Minority Shareholder?

A minority shareholder is someone who invests in or buys stock in a company but does not possess more than half of the total shares. Minority investors in Texas have specific rights, including the right to:

Receive Apportioned Dividends

When the corporation's profits are divided, each investor must get their fair portion of dividends.

Receive a Certificate of Ownership

The corporation must provide each shareholder with a certificate of ownership for the shares they own, and each share acquisition must be recorded appropriately. The stock certificate may be required if a shareholder wishes to claim their rights in court.

Review Records and Books

A shareholder who has owned shares in a firm for at least six months can seek access to the company's accounting records, financial statements, shareholder meeting minutes, and other legally needed information.

Attend an Annual Meeting of Stockholders

Corporations are required by law to convene a shareholder meeting at least once a year. Minority investors may be able to hear from majority stockholders or corporate officials regarding the company's performance and strategy during these meetings.

Sue Corporate Directors

A minority shareholder who feels the company's directors have broken their fiduciary responsibility might sue the directors on behalf of the company. A shareholder can also sue if the majority shareholders try to keep the company's prosperity to themselves by forming a second, separate company to profit from the first's success.

Because they believe it is unnecessary to issue stock certificates, attend corporate meetings, or make financial records transparent, some small firms with few shareholders inadvertently limit minority shareholder rights. Minority shareholder rights are sometimes restricted on purpose.

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What Are the Remedies for Shareholder Oppression in Texas?

To address oppression perpetrated by majority owners following the Ritchie judgment, minority shareholders have few resources. Suing for damages in a derivative action is the most common.

Shareholders have the right to sue their corporation directly or through a derivative action under corporate law. Directors of a business can be sued directly by shareholders if they fail to uphold their end of the bargain.

On the other side, a shareholder can file derivative litigation on behalf of the corporation. Because a business is treated as a person under the law, it is entitled to its rights.

Because companies are only legal entities, they cannot independently assert their rights. For example, a shareholder may file derivative litigation when the corporation's leadership refuses to protect its interests.

Shareholders in tightly owned businesses in Texas can launch derivative cases due to oppression by a majority shareholder under the Texas Business Organizations Code. It is common for oppressive shareholders to be sued for violation of fiduciary responsibility.

Derivative claims are not a replacement for pre-Rupe oppression claims since they are not based on harm to the shareholder. There is a chance for oppressed shareholders to take legal action against oppressive majority shareholders.

What Are the Legal Strategies of Our Shareholder Oppression Lawyer in Texas?

Our skilled shareholder oppression lawyer at GK Law recalls the Texas of the past, at least in terms of shareholder oppression, and Ritchie v. Rupe, as Houston-based corporate law and litigation firm who have been serving Texas for years.

We've refined our strategies for assisting minority shareholders in closely held companies as they fight to protect their rights and interests, emerge from squeeze-outs and free-outs, fight corporate misconduct, and – ultimately – bring actions to enforce legal obligations owed to them and address personal losses in the years since that ruling.

Those tactics are adapted to every instance and our client's specific concerns and objectives. There are, however, a few essential things to examine. These are some of them:

  • If the majority's actions are characterized as a violation of fiduciary responsibility due to the company, minority shareholders may be able to:
  • Pursue damages or equitable remedies based on the majority's ill-gotten gain (i.e., disgorgement of profits, court-ordered dividends, injunctive relief, etc.)
  • Using derivative actions, recover directly for the breach of fiduciary responsibility to the entity
  • Establish the majority's behavior as grounds for receivership to maintain and manage the company's affairs or a court-ordered "winding up" to terminate business obligations prior to liquidation.
  • Establish if the majority's actions constituted a contractual violation between the minority shareholder and the firm or the majority, which is one of many reasons to sign into a partner or shareholder agreement ahead of time.
  • Establish the majority's conduct as fraudulent, which may open the door to charges for inducement, fraudulent transfer of stock transactions, or state or federal securities fraud in some situations.

DO YOU HAVE LEGAL CONCERNS?

Complex transactions require experienced legal counsel. Our Houston real estate and business attorneys can help you with your real estate law, business law, and condemnation law concerns. We serve individuals and families in Houston, Texas.
AVOID LEGAL HAZARDS!

Seek Advice From an Experienced Shareholder Oppression Lawyer in Texas

Dealing with shareholder oppression may be aggravating, infuriating, perplexing, and financially damaging. When you establish a business with coworkers or associates, you hope that it will operate smoothly and successfully and prosper its stockholders.

When claims of shareholder oppression surface, however, conditions may quickly become tense and complicated.

If you are a minority shareholder in a closely held company and want assistance, you should contact a Texas shareholder oppression lawyer as soon as possible. Contact GK Law to talk about your case and learn more about the our law services we offer to individuals regarding their real estate or businesses in Texas.

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