Minnesota Shareholder Disputes
A “shareholder dispute” is a dispute among shareholders in a closely-held corporation. Similarly, members of limited liability companies (often referred to as “LLCs”) and partners in a partnership may find themselves involved in similar disputes with fellow owners. Our attorneys represent both majority and minority stakeholders in business disputes.
In addition to case law, the Minnesota law governing these business disputes may be found in the following chapters:
- Corporations – Chapter 302A of the Minnesota Statutes
- Limited Liability Companies – Chapter 322B of the Minnesota Statutes
- Partnerships – Chapter 323A of the Minnesota Statutes
Our attorneys routinely provide advice to shareholders, members and partners involved in disputes with fellow owners. Where a dispute cannot be resolved through discussion and typical governing processes (such as board meetings), or if the owners controlling the entity are acting unfairly towards the non-controlling owners, our shareholder litigation attorneys can explain how litigation can help business owners protect their rights.
Abuse of Minority Shareholders or Members
In the context of business disputes, a “minority owner” is someone who holds less than 50 percent of the shares or membership units in a company. In other words, where voting is concerned, a minority owner can never out-vote the other side because the minority owner does not have a large enough stake in the company. Historically, minority owners were sometimes subject to abuses and unfair practices imposed on them by majority owners. Legislatures and courts stepped in to remedy the situation. Although minority owners cannot control a company, the playing field has been leveled, and certain minority shareholder abuses have been banned.
Where a dispute arises among shareholders of a corporation or members of an LLC, the person or group in control of the company may act lawfully and properly. However, the majority owner(s) might overstep the legal boundaries established by Minnesota law. The group of owners in control of a company might steal from a company, take money out of the company without sharing an appropriate percentage with other owners, might fire or terminate the employment of a minority owner, or may take “loans” from the company without proper approvals. Likewise, a majority owner might improperly induce an investor to become a minority shareholder based on false claims about the value of the shares or the future prospects of the company. The list of improprieties that can occur in this context is lengthy, but where wrongdoing does occur, the law provides a remedy through litigation.
Unfairly Prejudicial Conduct
Inequitable or unfairly prejudicial conduct that frustrates the reasonable expectations of a minority shareholder is illegal under Minnesota law. Where it occurs, a minority owner may ask a court to force a majority owner to pay the minority shareholder damages, including payment for lost wages (if a termination occurred) and for the “fair value” of the ownership interest (unless a valid contract requires a different method of valuation). Each case is unique, and our shareholder litigation attorneys can evaluate the specific facts of a business owner dispute and provide frank advice about strengths, weaknesses and possible outcomes.