In its broadest sense, the business judgment rule is a policy of respect by the courts for the business judgment of corporate directors in exercising their discretion in making corporate decisions.
I use the term “shareholder oppression” to refer to the denial of any realistic benefit to a shareholder for their investment in the company. So, how do the people in control of a privately held company oppress minority shareholders? I will discuss that in this article.
Shareholders Rights to Corporate Annual Financial Reports Under California Corporations Code §1501(a)
Corporations have a statutory and fiduciary duty to provide shareholders with an annual report containing an up-to-date balance sheet, income statement, and a statement of cash flows accompanied by any independent auditors’ reports, within 120 days of the end of the previous fiscal year.
Shareholders have limited rights to inspect the records of California corporations. While statutory laws governing the types of records shareholders may examine are complex and may appear unwieldy, an experienced attorney may assist the shareholder to take full advantage of broader common law shareholder rights of inspection
Federal Court in California Nixes Forum Selection Clause in Delaware Corporation’s Bylaws that Would Require Shareholders Outside Delaware to Bring Suit Against the Corporation in Delaware.
In recent years, several Delaware corporations have either adopted or proposed exclusive forum selection bylaw provisions. These provisions generally require that stockholder suits relating to the internal affairs of a corporation be brought exclusively in the company’s state of incorporation, Delaware. However, a minority shareholder in California might prefer to bring suit here
California Law May Determine Critical Corporate Governance Issues Even Though It’s a Delaware, Nevada or Texas Corporation
WARNING: A potential investor should not assume merely because she buys stock in a corporation based in the Golden State, that California’s corporations laws will protect the shareholder from losses if the founders or other insiders defraud the company!
Discover what shareholder oppression remedies are available for shareholders in California.
Shareholder Election of Directors, Cumulative Voting Rules and Annual Shareholder Meeting Requirements for California Corporations
Discover how minority shareholders are protected by California statues that govern the election of directors.
Learn about the rules governing voting by directors and the tallying of the votes by corporate boards in California.
Learn why minority shareholders can sue the controlling shareholders for breach of fiduciary duty where they compensate themselves excessively as a means to distribute a disproportionate share of the corporation’s profits to themselves and to the exclusion of the minority shareholders.