Demanding fair treatment as a minority shareholder

On Behalf of | Jan 25, 2019 | Firm News

A closely held corporation may be the perfect structure for your family business. The benefits of not going public with your shares include keeping simplicity in the operation of the business and allowing only a few people to have control of the company. However, when tension erupts among the shareholders, it may be more sorely felt in a closely held structure.

In many closely held businesses, the shareholders do not possess an equal number of shares. Some may have substantially more, which gives them a more active role in the workings of the business. If you hold a minority share in an Ohio company, you may not have the right to involvement in the decision-making process, including voting for major changes in operations. However, this does not mean you have no rights.

Keeping you in the loop

It is true that those with a controlling interest in the company hold more authority. Their investment is larger, so they have more say in how the board of directors and officers will act. However, they also have a fiduciary duty to you and the other minority shareholders in the company.

You have the right to know, for example, if the shareholders have voted to sell the company or restructure it under a new entity. With this information, you have the choice of going along with the changes, or you can force the controlling interest to purchase your shares.

Remedies for unfair treatment

You may be in the unfortunate situation of having the controlling shareholders treat you unfairly. In a closely held business, this may be one person or a small group holding the majority shares who work to reduce the value of your shares or minimize your profits. Since you have no voting power, it may seem like you can do little about it. However, you may be able to seek a remedy with the assistance of an attorney who can employ the statues protecting minority shareholders.

These statutes allow you to call for the dissolution of the corporation if there is evidence that its shareholders or officers are committing fraud or mismanaging the company. This may not be easy to prove. Additionally, there may be other options available if you feel the majority shareholders in your closely held business are not treating you fairly. The assistance of a skilled business law attorney can prove invaluable.