Minority Shareholder Rights & Oppression Claims (302A)
Avoiding litigation with smart governance and disclosures
In closely held Minnesota corporations, majority owners must treat minority shareholders fairly. When they don’t, courts can provide remedies ranging from buy-outs to changes in governance. Prevention is almost always cheaper than litigation.
What “Unfairly Prejudicial” Looks Like
Freeze-outs: Cutting a minority off from employment, dividends, or information.
Self-dealing: Paying above-market to a majority-owned affiliate without approvals.
Withholding records: Dodging requests for financials, minutes, or cap tables.
Squeeze tactics: Dilution without opportunity to participate; compensation games that send value to insiders.
Governance That Prevents Claims
Shareholder control agreements or buy-sells with clear valuation methods, funding, and triggers (death, disability, retirement, deadlock).
Board process: Regular meetings, documented decisions, and recusals on conflicted transactions.
Information rights: Scheduled financial reporting; data rooms for owners.
Dividend/compensation policy: Written, consistent, and tied to capital needs.
Valuation: Where Fights Start
Set a formula (e.g., trailing EBITDA multiple) or a three-appraisal mechanism with tie-break rules. Address discounts (minority, lack of marketability) and working-capital targets up front.
When a Dispute Is Brewing
Offer a documented buy-out path.
Use mediation with an agreed valuator.
Keep communications professional—courts will read them.
Bottom line: Clear rules and consistent disclosures reduce suspicion and litigation risk. If a dispute erupts, a principled buy-out mechanism is your best off-ramp.
Our corporate litigators and corporate transactional lawyers team up to design protective governance—and resolve shareholder disputes efficiently when they happen.
