Shareholder oppression claims arise when the majority shareholders in a corporation take actions that unfairly prejudice minority investors. Most instances of shareholder oppression occur in small closely-held corporations, and the small nature of the situations make minority shareholders particularly vulnerable.
There are several different manners in which minority investors may be mistreated, and they are not always easy to define, though as a general rule, if the majority shareholders harm the economic interests of the minority, the minority shareholders may have a claim against the corporation, and file a lawsuit for rightful compensation.
Joe Lyon is a highly-rated Cincinnati, Ohio lawyer representing plaintiffs nationwide in a wide variety of corporate labor disputes.
Common Examples of Shareholder Oppression
The most common way the courts determine shareholder oppression is if the “reasonable expectations” of minority shareholders are violated. This is sometimes a subjective benchmark as far as what is fair and what is not. However, if the majority shareholders in your case have tried the following, you may have a claim:
• Refusing to declare dividends, or “informal dividends” issued to only majority investors
• Attempting to push the minority out of the company
• Physically locked the minority out of corporate premises
• Denial of company information, and denying the minority the chance to inspect corporate records
• Attempt to deprive stock ownership
• Attempt to purchase minority shares at an unfair price—Implementing an unfair stock redemption plan that favors majority shareholders
• Cash-Out merger that cuts minority out of deal
• Loss of Employment—termination of a minority shareholder’s employment from a closely held corporation likely constitutes oppression
• Change in employment status
• No notice of shareholder meetings—denial of participation
• Attempt to change minority shareholder terms
• Inequality of company shares
• Altering corporate books
• Not allowing minority shareholders to protect themselves from dilution of their equity
• Using corporate funds to pay the personal expenses of other shareholders or related parties (family)
