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Minority Shareholder Rights Overview

Minority shareholders in privately held corporations typically have little power to influence the governance of the corporation and the conduct of its business through the exercise of their voting rights.  The majority shareholder or shareholders have enough shares of the corporation’s stock to control the business.  But minority shareholders are not without legal means to protect their interests in the corporation, and they are not without legal remedies to obtain redress for wrongdoing by corporate insiders and other persons in control of the corporation.   Jerry Burleson is an ethical trial lawyer with offices in San Diego and San Fransicso who devotes his legal practice to the representation of minority shareholders who are seeking to protect their investments in the corporation from loss and to obtain redress (damages) for harm that has been done to their interests in the corporation.

Shareholders must be proactive in exercising their legal shareholder rights to protect their investments in the corporation.  Shareholders cannot protect their interests, and corporate directors cannot fulfill their fiduciary duties, without access to information about the activities of the corporation and its financial performance.  Shareholders are entitled to participate in the governance of the corporation through the election of directors and through acting on matters properly brought before them at shareholder meetings.  If the corporation fails to hold an annual shareholders’ meeting at which the shareholders have the opportunity to elect directors, any shareholder can seek to compel the corporation to hold an annual meeting of the shareholders.  If a corporation is going to be acquired by or merged with another company, a shareholder may have the right to be cashed out in a merger or acquisition transaction, referred to as “dissenting shareholder” rights.

When a shareholder has been denied the benefit of his or her investment in a corporation because of the improper actions of corporate insiders and other persons in control of the corporation, including controlling stockholders, executive employees, officers or directors of a corporation, the shareholder has legal remedies.  If a shareholder was persuaded to buy stock in the corporation or to sell her stock back to the corporation or to an insider as a result of misrepresentations or omissions of material information, the shareholder may be able to bring a lawsuit for securities fraud.  If a controlling stockholder uses his ability to control the corporation for his own benefit and in a manner that is detrimental to the other shareholders, a minority shareholder may be able to bring a suit for damages directly against the controlling shareholder for breach of fiduciary duty by the controlling shareholder.

If the corporation itself has been ripped off and suffered a loss as a result of wrongdoing by a corporate insider, and the board of directors fails to take action to protect the corporation’s interests, a shareholder may be able to bring a shareholder derivative action in right of the corporation to pursue the legal claim that the corporation’s board failed to pursue.  Occasionally there are numerous shareholders who have been ripped off by corporate insiders in the same way.  In such situations, it may be more economical for one or a few shareholders to bring a lawsuit for the benefit of all of the similarly situated shareholders.  A class action by defrauded shareholders can be an economical way for one or several shareholders to take up the cause to seek redress for such a rip off in behalf of numerous shareholders where the size of each individual shareholder’s loss does not justify the cost of bringing a separate lawsuit by each shareholder.

As an ethical California lawyer Jerry Burleson can help you and guide in any questions and concerns you may have regarding any shareholder rights.