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  • Sharehoder Law

  • What is shareholder law?

    What is shareholder law?  

    When you own shares of stock in a corporation,  than your right as a shareholder in that corporation is governed by a set of shareholder 

    When you own shares of stock in a corporation or membership units in an LLC,  then your right as a shareholder or member are governed by whatever agreements are in place among the other shareholders or members and state laws that define or limit your rights and remedies.  There is a hierarchy of rights set by every corporation or LLC for the three main types of securities which companies issue to raise capital namely bonds, preferred stock and common stock

    How does a shareholder Law work? 

    Shareholders (or Members) are collective owners of the corporation (or LLC) with each share (or unit) of stock entitling owners to have a voice in how the corporation should be run.  One common principal responsibility of Shareholders (or Members) is to elect board of directors who oversee or make company's major decisions.  Board members have a fiduciary duty to the corporation to act with no conflict of interest and to exercise care in their decision making.  

    What are the basic rights of shareholders?

    The common stock shareholder’s rights can be broadly classified in 5 main categories

    • Voting Power - If you own stock in a corporation, you own a portion of the company and you have voting right on major issues
    • As a shareholder, you have the right to transfer ownership of your shares
    • As a shareholder, you are entitled to dividends which a corporation may distribute to its shareholders
    • Inspection - you have right to inspect corporate books & records, and this right is enshrined in the laws of each state
    • And finally, as a shareholder who may be unjustly oppressed, you have the right to sue for acts you think are wrong to seek justice

    How do the Shareholder Inspection Rights fare nationally?

    The fundamental right to information for shareholders is enshrined and recognized in every state.  Shareholders in most states can inspect corporate records using an express statutory procedure.  The express statutory procedures are mostly similar in all 50 states, but there may be some subtle differences which can impact outcomes.

    What is the hierarchy of rights of common and preferred stock shareholders?

    Common shareholders are the bottom in terms of rights hierarchy versus preferred stock holders and bondholders who will get the first right to company's assets for purposes of distribution and/or liquidation

     

    Does Shareholder Oppression law vary by states? 

    State law does vary and sometimes it may do so significantly for shareholder oppression laws.  There is a statutory or common law doctrine of shareholder oppression which most states do follow and which also recognizes remedies for shareholder oppression.  In extreme cases of shareholder oppression, almost all 50 states provide for dissolution of corporations and some lesser remedies like forced buy outs versus outright dissolution.  Than again, some states may reject the buy out remedy while others still have yet to address the dissolution issue.

    When it comes to shareholder derivative claims, we find all states do permit shareholders to bring derivative actions, but the procedural and remedial differences may vary from state to state and some of the differences may be significant.

  • Shareholderlaw in MN | Peters Law Firm

    In Minnesota, one can be a minority shareholder in a corporation or an LLC and a minority shareholder can be at unjust odds with majority shareholders especially in closely held companies.  

    In Minnesota, an individual, or an entity, can occupy the position of a minority shareholder in at least two distinct, but similar, types of legal entities, a corporation or a limited liability company (LLC). Occupying a minority position in either of these entities, especially in a closely-held companies, puts the shareholder at the mercy of the majority. To ensure some degree of protection from unfairly prejudicial treatment towards the minority shareholders, the Minnesota legislature promulgated a serious of statutes, modeled largely on the Model Business Corporation Act (Model Act).

    Minn.Stat § 302A.751

    This main statute provides protection for minority shareholders of closely-held corporations. Section 751 which is modeled after the Model Act §14.30 (a)(2)(ii) authorizes equitable relief for minority shareholders who fail or are unable to bargain for and obtain adequate contractual safeguards in the articles, bylaws or a shareholder agreement or if the controlling shareholders  and/or directors acted in an unfairly prejudicial manner. Events interpreted as “breach of fiduciary duty” or a failure of “shareholder’s reasonable expectations with respect to his relationship to the corporation” all come in the ambit of unfair prejudice.

    Minn.Stat § 322B.833 Subd. 1(2)(iii) reflects the same identical relief for minority members of LLC's who have been subject to “unfairly prejudicial” treatment by governors (which are LLC directors) and/or majority members

    MN statutes use broad concepts instead of specifics in their definition of “equitable relief”  and it is  intentionally left to court of laws to make that judicial determination on a case by case basis, with references to similar case precedent.” 

    This is where Peters Law Firm excels as this judicial uncertainty creates incentives to resolve conflict differences. With our extensive background in shareholder law, we are able to help you strategically frame your case with the with a goal of strengthening your hand in negotiations or in a court of law if necessary.