What to Avoid If You Are Seeking Compensation as a Minority Shareholder

Avoid Instigating Actions Motivated Purely by Revenge

What can harm a minority shareholder is if he or she tries to do things to destroy the corporation or other actions done just out of spite, to try to get even. We’ve seen cases where a minority shareholder thinks he’s just locked out of his investment and might try to start a competing company to try to get some kind of leverage. Those kinds of actions can result in counterclaims that come back to harm their case.

No Shareholder Has the Right to Seize Corporate Assets

Minority shareholders need to avoid holding property or documents or computers that belong to the company. They would be mistaken thinking they were helping themselves by seizing corporate assets; no shareholder has the right to seize corporate assets. There’s a distinction. All you own as a shareholder are your shares of stock and that doesn’t translate into, “Okay. Well, if I own one third of the stock, I get one third of the inventory.” It just doesn’t work that way.

Minority Ownership Oppression: Oppression Can Also Occur in Business Partnerships

Any minority owner who owns interest in a company, whether it is a regular corporation, a limited liability company, or a partnerships, can have these same rights. It’s feasible to have oppression in a 50-50 ownership situation only because one of the people typically is going to be designated as the president or CEO of the corporation. Even though that person’s only a 50% owner, the other owner doesn’t have the ability to vote him out of office. At that point, he has control over the corporation. It’s not something we see very often but it does happen.

Is There a Legal Distinction between Taking Corporate Opportunity and Siphoning Company Assets?

The majority owner doesn’t have a big motive to prune customers away or divert them away unless they have formed a second company that they own entirely.

Legally, it is called ‘taking a corporate opportunity’. For example, a corporation was set up to serve a certain aspect of health insurance. The majority owners, when they didn’t want to share the profits with the minority owner, expanded into dental insurance. They offered the same kind of product and said, “we’re going to form a separate company to do that.” The company went out using the same employees and same office space that were paid for by the original corporation and started to service this new industry through a second company, claiming that all the profit from that were theirs.


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