Shareholder Litigation: What's Your Shareholder Dispute?

Litigations provides shareholders with the opportunity to prevent and remedy a dispute – whether that dispute involves alleged wrongdoing committed against the corporation itself or against an individual shareholder and their ownership interests. Because there are many ways conflict can arise between and among shareholders, and because shareholders have distinct rights when working to protect their interests and the interests of a business, understanding what’s at issue in your dispute can help you understand your available options, and the most appropriate path to pursue.

While there are a number of issues and specific forms of conduct that can give rise to shareholder disputes and litigation – from fiduciary breaches involving misrepresentation or illegal insider trading by directors to shareholder oppression – those issues can be boiled down to a few basic concepts. These may include:

  • Shareholder Derivative Lawsuits – Derivative lawsuits are claims shareholders bring on behalf of a company, and they can be a powerful tool for fighting corporate misconduct, ensuring accountability, or bringing action against third parties who may have contributed to their losses. Derivative suits are typically brought when corporations are unable or unwilling to bring valid lawsuits, such as claims against directors or officers who breach their fiduciary duty and are unlikely to bring claims against themselves for misconduct such as self-dealing, misrepresentation, and corporate waste. They can also be the foundation of litigating shareholder disputes involving oppression, as many procedural requirements for most corporate owners are waived for those in closely held corporations.
  • Shareholder Direct Lawsuits – Direct claims allow individual shareholders to enforce legal obligations they are owed by corporations, including directors and officers. They may be used to address individual losses resulting from the corporation’s misconduct, and when asserting direct claims to fight shareholder oppression.
  • Disputes in Closely Held Businesses – Closely held corporations create substantial risks when it comes to minority shareholders and their vulnerable ownership interest, including risks of shareholder oppression or “squeeze-outs” and “freeze-outs.” In Texas, the landmark ruling Ritchie v. Rupe, which struck down the shareholder oppression cause of action, has made shareholder litigation involving closely held businesses a relative new frontier. However, minority shareholders still have rights to hold majority shareholders accountable and pursue legal remedy based on other causes of action.
  • Other Shareholder Concerns – Shareholders have warranted interests that may not necessarily demand or require litigation, such as bringing concerns to directors regarding issues like sustainability, raising objections to matters of excessive executive compensation, structuring sound agreements and governing bylaws / corporate documents, and other matters that affect their rights and interests as owners – both now and in the future.

Understanding what’s at the core of your shareholder dispute can provide you with a sense of direction when it comes to evaluating your options and generally what litigation may entail. However, the complexity of these cases, as well as the density of Texas laws regarding shareholder litigation, make it crucial to have legal representation by your side from the very beginning.

Through due diligence and meticulous evaluation of our clients’ current situations, options, and objectives, our team at Hendershot Cowart P.C. can help structure the targeted and most appropriate approach for litigating a dispute and seeking recourse involving all types of issues, including:

  • Breach of fiduciary duty / Breach of contract
  • Theft of trade secrets
  • Violations of shareholder agreements
  • Fraud, misrepresentation, and conspiracy
  • Conversion of property
  • Unjust enrichment

Whether your situation warrants a direct or derivative lawsuit, or another form of litigation or dispute resolution, our comprehensive approach and depth of experience allow us to tackle even the toughest matters.

Comprehensive Services for Texas Shareholders

At Hendershot Cowart P.C., our Houston shareholder litigation attorneys draw from more than 130 years of collective experience. This insight and experience allow us to handle and effectively resolve a range of disputes involving shareholders, and to protect our clients’ rights and interests at all stages of the process. From shaping tailored strategies to seeking redress and equitable remedies, we guide clients through their legal journeys, and tackle tough legal issues on their behalf.

In addition to using our experience to responsively representing clients facing shareholder litigation, we also leverage that insight to assist clients on a proactive bases. “An ounce of prevention is worth a pound of cure,” when it comes to reducing risk exposure and the potential for disputes, and especially for enforceability and successful outcomes when issues do arise. This is why we take a comprehensive approach to helping clients assess their circumstances and draft the necessary corporate documents and policies that can protect their interests, from shareholder agreements and contracts for employment, transactions, and business relationships to buy-sell agreements and more.

Discuss your case and rights personally with a top-rated team of Texas trial lawyers. Call (713) 909-7323 or contact us online today.


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