Feldman Legal Group represents shareholders, partners and LLC members in disputes related to their ownership, employment and compensation in closely held companies of all kinds. We have represented attorneys, doctors and franchisee owners in all sorts of disputes related to the freeze out, termination and oppressive conduct of the majority or managing owners, partners or LLC members. Contact Feldman Legal Group, Florida’s shareholder dispute attorneys, and partnership and LLC member dispute attorneys for practical, strategic legal advice in any situation where your interests and rights are concerned.
Feldman Legal Group has represented shareholders of closely held corporations throughout the state of Florida in disputes related to their ownership interest and termination of employment, as well as in assisting in buyouts or purchase of shares for reasonable values.
If you are a shareholder who has been dismissed from the company or suspect that the majority owners are wasting company assets or suing the company assets unfairly for their own benefit, consult the experienced shareholder dispute lawyers at Feldman Legal Group.
Majority Shareholder Oppression and Freeze Outs: What Are My Rights?
In small, closely held companies, the minority shareholder who does not have a separate employment contract can be treated as an employee at will. If, however, the majority shareholder or shareholders become financially greedy, or simply wish to do things their own way and see a benefit to terminating the employment of the minority shareholder, what can the minority shareholder do to protect his or her interests and stake in the company?
In most situations, the minority shareholder cannot freely sell the shares in the open marketplace, and without an employment contract guaranteeing income, the employee may have little hope to ever receive a return on his or her investment or share in the profits of the company. The majority shareholders may agree to buy back the minority shareholder’s shares for nuisance or nominal values.
In many situations, the minority shareholder who does not have an employment contract may have limited rights to any further compensation other than the dividends or profits, if there are any.
Does a Minority Shareholder Have Any Employment Rights?
Each shareholder owes the other shareholder a fiduciary duty to act with the utmost good faith and loyalty. If the other shareholders or the majority shareholder simply wanted to get rid of the minority shareholder to increase his or their own compensation, such could be a breach of the fiduciary duty owed to the minority shareholder. Taking actions to freeze-out the minority shareholder is often an intentional violation of this fiduciary duty. Majority shareholders owe fiduciary duties to the minority shareholders to not use their control of the corporation to put the minority at a disadvantage.
If the minority shareholder’s expectation for compensation was tied to his or her salary and wages or bonuses, and the majority shareholder(s) knew of this when the minority shareholder become an equity stakeholder, the minority shareholder has a reasonably good chance of prevailing on a breach of fiduciary duty claim against the oppressive majority shareholder(s).
Some courts will look at whether the majority shareholder(s) had a legitimate business interest in terminating the minority shareholder’s employment. If such justification is absent, the minority shareholder, again, may very well prevail in a claim for breach of fiduciary duty of loyalty and good faith.
What remedies are available to the minority shareholder who is frozen out or whose employment was terminated?
A shareholder dispute attorney can guide you through the options available to you. Depending on how you were frozen out or terminated, your rights make the following remedies available to you:
1. Restore the minority shareholder to his or her prior employment position, and provide the minority shareholder those benefits which he or she reasonably expected to receive, plus back wages, loss of profits or dividends.
2. Severance pay or fair compensation for lost wages is also available.
3. Force the majority to purchase or buy back the minority shareholder’s shares. This will depend in large part on the contract and shareholder agreements.
4. Force a business break up. An ousted minority shareholder may file a lawsuit against the corporation and seek an order of the court dissolving the business and distribute the company assets. This may also depend as well upon the facts which lead to the termination of the shareholder’s employment.
5. If you are a 50 percent or more equity shareholder, you may petition a court to dissolve the corporation and distribute the assets. If you own a minority interest, you may possibly succeed in the forced dissolution of the corporation if the owners have engaged in illegal, fraudulent or oppressive actions.
6. The shareholder agreement may also be able to force the minority shareholder into a forced buyout of your equity stake. The majority usually has a set time frame to make this offer (such as 60 days) or this right is waived.
7. Any shareholder, whether before or after termination of employment, can demand to inspect the corporate books and records and financial information pursuant to F.S. 607.1602. The corporation must provide the shareholder the following information: a) records of all minutes of any meetings of shareholders and board of directors; b) accounting records of the corporation, including salary and bonus payments made to personnel and all records of vendors paid by the corporation; c) complete disclosure of all lawsuits pending or previously filed against the corporation; d) complete reporting of advances or expenses paid to any director, officer or employee; e) disclosure of the corporation’s issuance of additional shares or promises to pay shares to any party and e) copies of financial statements that are required to be delivered to the shareholders each year pursuant to Florida statues.
Any corporation, including such action by the majority shareholders to refuse any shareholder’s demand for inspection of the records, may file a lawsuit and seek payment of attorney’s fees and costs pursuant to F.S. 607.1604. The demand to inspect the records must be made at least five days in advance of the inspection, and it must be made in good faith and for a proper purpose. A proper purpose for inspection is usually defined as “one that is lawful in character and not contrary to the interest of the corporation” for the purpose of protecting the shareholder’s interests.
8. Bring a shareholder derivative suit: A shareholder of a closely held corporation may bring a derivative suit on behalf of the corporation for wrongs against the corporation. F.S. 607.07401. The shareholder seeking the derivative action must first make a demand in writing giving the corporation time to correct the conduct or act accordingly. Any injured shareholder can sue independently for the injury sustained.
Get Help From a Florida Shareholder Dispute Lawyer
The Florida shareholder dispute attorneys at Feldman Legal Group assist shareholders who were treated unfairly. Talk to an experienced civil litigation attorney to find out if you have a case. Contact us to get your free case assessment.