Dallas Shareholder Oppression

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Individuals who invest and purchase shares in a company do their best to safeguard their investment. Likewise, the company’s directors and management use reasonable judgment to make day-to-day business decisions. Although, in theory, this symbiotic relationship seems to run smoothly, the reality is, disputes can occur. One of the most highly contested cases in this field involves shareholder disputes and disputes between members of limited liability companies or LLCs. Shareholder disputes can take shape in many forms. For instance, some shareholders or members could find that their stake in the company has been unjustly diluted. Another common dispute may arise when minority shareholders allege that majority shareholders receive inflated salaries or superfluous bonuses. Disagreements can also occur when profit shares are not distributed in an appropriate manner. Many of these disputes result from minority shareholder oppression. 

If you believe that you are a minority shareholder or member of an LLC experiencing shareholder oppression, Wade McClure at Mayer LLP is here to provide you with legal assistance and help you obtain a remedy. Wade McClure at Mayer LLP possess an extensive background in business law and resolving disputes between owners of a business. Whether you are a small business owner or a majority shareholder in a corporation, we are here to provide you with expert advice and help you obtain the remedy you are entitled to. By retaining an experienced business litigation attorney, you can better understand your current situation, develop a clear goal, and take action. Call today to schedule your initial consultation. 

What Is Shareholder Oppression?

In a Texas-based company, a minority shareholder refers to an individual who does not possess sufficient interest in the company to have a right to manage the corporation, LLC, or other business entity. In contrast, majority shareholders own and control most of a company’s stock and have a sufficient interest in the business. As a result, the minority shareholder does not have as much control compared to their majority shareholder counterparts. 

Shareholder oppression occurs when the majority shareholders of a company or managing members of an LLC take actions that unjustly prejudice the minority shareholders of the company. More specifically, when the majority band together to disenfranchise minority shareholders or LLC members in some capacity. Minority shareholder oppression most commonly occurs in non-publicly traded companies; the paucity of a public market for shares only amplifies a minority shareholder’s vulnerability. To help remedy the issue of minority shareholder oppression, minority shareholders should attempt to have a shareholder agreement or LLC Operating Agreement. 

Shareholder Agreements Protect Minority Shareholders

A shareholder agreement or LLC Operating Agreement can provide safeguards for minority shareholders and minority members of an LLC. Without a shareholder agreement or LLC Operating Agreement, there are not many remedies available for Texans who hold a minority interest. For example, if there is no shareholder agreement, majority shareholders could try to force minority shareholders to sell their shares sizably below market value. A minority shareholder would not have many protections or any recourse. 

What Rights Do Minority Shareholders Have In Texas?

Texas courts have recently found that minority shareholders or interest owners have fewer protections from shareholder oppression. But protections can exist and should be safeguarded. A semi-recent landmark decision overturned the previous shareholder oppression doctrine in Texas, making it now more difficult for minority shareholders to sue majority shareholders in Texas. However, minority shareholders and other business interest owners still retain rights and avenues for remedy. Texan minority shareholders have the right to information regarding the company, a right to a yearly meeting to voice opinions about corporate affairs, and possibly a right to transfer stocks and a proportional share of business profits. In addition to these rights, directors of a corporation and managers of Texas LLCs may owe fiduciary duties to the Company and under some circumstances to the minority shareholders or non-managing members of the LLC, including duties of loyalty, full disclosure of ongoing affairs, and impartiality. 

Contact Us For Your Initial Consultation

Wade McClure at Mayer LLP is experienced in business dealings, whether it be complex corporate structured or detailed contractual agreements. Once retained, we will immediately begin discussing and planning a route of action. Our years in complex commercial litigation can help you reach a resolution.

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