Closely held corporations have ownership structures that often leave minority shareholders in vulnerable positions. Shareholder oppression occurs when majority shareholders leverage their power to take action that unfairly prejudices the minority. When a typical shareholder scenario plays out, a minority shareholder at odds with management (which is controlled by the majority shareholder) can become trapped without any ability to protect their interests or withdraw their investment due to an inability to sell closely held stock. In some cases, if the minority shareholder is also an employee, they can be terminated with stock they can’t sell. This is commonly referred to as a “squeeze out” or “freeze out.”
As recognized industry leaders in business law with over 150 years of combined experience, our attorneys at Hendershot, Cannon & Hisey, P.C. provide the comprehensive counsel shareholders need to protect their interests. Given the difficult nature of these cases, particularly in light of a landmark Texas Supreme Court decision that overturned shareholder oppression as a common law cause of action (or the right to sue for damages or enforcement), minority shareholders require creative solutions and experienced representation capable of producing the positive outcomes they need.
To learn more about your options or how our law firm can help call (713) 909-7323 or contact us online to schedule a consultation. Our firm represents both minority shareholders who believe they are victims of shareholder oppression and shareholders who have been accused of shareholder oppression.
In the absence of a common law cause of action for shareholder oppression brought about by Ritchie v. Rupe, many felt a significant blow had been dealt to the rights of minority shareholders. However, Texas Supreme Court Justices did note that even without an oppression claim, minority shareholders may still have options and adequate remedies to hold majority shareholders accountable for oppressive conduct.
For example, the same conduct that can contribute to oppression claims may also provide the basis for other causes of action:
Even if you or your business is not experiencing shareholder oppression, our Houston business law firm can advise you on rights and protections in shareholder agreements and other governing documents that can help mitigate future potential areas of conflict.
Because things don’t always go as planned, establishing a shareholders’ agreement is vital to protecting oneself in the event that relationships change and disputes arise. However, not all shareholders create the type of prenuptial agreements that can protect them when things go wrong, especially when small privately held companies are forged through relationships between friends or family reluctant to believe either party would ever engage in oppressive conduct.
Without such agreements, minority shareholders find themselves exposed to shareholder oppression, limited to few options for extracting themselves from a business relationship without financial loss, and narrowed in their ability to recovery. By working with an attorney early in the process and crafting a reasonable shareholder agreement, minority shareholders can protect their interests and benefit from options should the need arise.
At Hendershot, Cannon & Hisey, our business practice spans two decades and includes experience with legal issues from business formation through litigating complex shareholder disputes. We understand recent changes to shareholder oppression law in Texas and can prepare the strongest possible case to protect your business interests. Call (713) 909-7323 or contact us online to schedule a consultation.