Majority Shareholder vs. Minority Shareholder Challenges

What are majority shareholder vs. minority shareholder challenges?

When it comes to shareholders, there are two main types: majority shareholders and minority shareholders. Majority shareholders own more than 50% of the company’s shares, while minority shareholders own less than 50%. Majority vs. minority shareholder challenges are disputes between majority shareholders and minority shareholders of a company over issues such as control, management, valuation, and decision-making.

When majority and minority shareholder interests do not align, they tend to disagree about the next steps, and, in some cases, their disagreements escalate to full-blown litigation. Critically, these disputes often arise from considerations unique to majority and minority shareholders, including::

Majority shareholder considerations:

• Decision-making power: As majority shareholders own more than half of the shares, they can make critical decisions for the company. However, this can lead to conflicts with minority shareholders who may disagree with their choices.
• Accountability: Majority shareholders are held accountable for the company’s performance and may face legal and financial consequences if the company fails to meet its obligations.
• Duty of care: Majority shareholders have a duty of care to act in the best interests of the company and all its shareholders. This duty can be challenging as they may have conflicting interests and priorities, especially with minority shareholders.

Minority shareholder considerations:

• Lack of decision-making power: Minority shareholders may not have enough voting power to influence critical decisions made by the company, such as the appointment of directors or significant investments.
• Limited information: Minority shareholders may not have access to all the information they need to make informed decisions about the company.
• Exclusion from decision-making: Minority shareholders may feel excluded from decision-making processes, which can lead to a sense of frustration and dissatisfaction.
• Risk of oppression: Minority shareholders may be at risk of oppression by the majority shareholders, who may prioritize their interests over the interests of the minority shareholders.

Need help with a matter related to majority shareholder vs. minority shareholder challenges? Schedule your consultation today with a top shareholder disputes and derivative litigation attorney.

In Florida, which laws and regulations relate to majority shareholder vs. minority shareholder challenges?

In Florida, the laws and regulations relating to majority shareholder vs. minority shareholder challenges follow the governance of the Florida Business Corporation Act (FBCA) and the Florida Revised Limited Liability Company Act (FRLLCA). These acts provide a framework for the governance and operation of corporations and limited liability companies in Florida.

Here are some of the key provisions of these acts that relate to majority shareholder vs. minority shareholder challenges:

• Fiduciary Duties: Under the FBCA, directors and officers of a corporation owe a fiduciary duty to the corporation and its shareholders, which includes both majority and minority shareholders. This duty requires them to act in good faith with the corporation’s and its shareholders’ best interests in mind.
• Shareholder Meetings: The FBCA requires that corporations hold annual meetings of shareholders, during which shareholders, including minority shareholders, can vote on crucial decisions, such as the election of directors.
• Shareholder Oppression: Under the FRLLCA, minority shareholders have the right to bring an action against the company if they believe the majority shareholders have oppressed them through measures such as excluding minority shareholders from decision-making or diverting corporate opportunities to the majority shareholders.
• Dissolution: In some cases, minority shareholders may seek to dissolve the company if they believe it no longer operates in their best interests. The FBCA and FRLLCA provide provisions for the voluntary and involuntary dissolution of corporations and limited liability companies.

What are common issues regarding majority shareholder vs. minority shareholder challenges that lead to litigation?

There are several common issues regarding majority shareholder vs. minority shareholder challenges that can lead to litigation. Here are a few examples:

• Breach of fiduciary duty: Majority shareholders owe a fiduciary duty to the company and its shareholders, including minority shareholders. Suppose the majority shareholders breach this duty by taking actions that harm the company or the minority shareholders, such as self-dealing or failing to disclose important information. In that case, minority shareholders may sue for breach of fiduciary duty.
• Oppression: Minority shareholders may sue for oppression if the majority shareholders engage in conduct that is unfairly prejudicial to the interests of the minority shareholders. Examples of oppressive conduct include excluding minority shareholders from important decisions or diverting corporate opportunities to the majority shareholders.
• Freezing out: Majority shareholders may engage in conduct that effectively “freezes out” minority shareholders, such as diluting their shares or refusing to pay dividends. Minority shareholders may sue to protect their rights and interests in the company.
• Shareholder derivative actions: If the company suffers harm due to the efforts of the majority shareholders or the company’s directors and officers, minority shareholders may bring a shareholder derivative action on behalf of the company to recover damages.
• Valuation disputes: When a minority shareholder seeks to sell their shares in the company, disputes may arise over the valuation of those shares. Minority shareholders may sue for a fair valuation of their shares, while majority shareholders may resist paying a higher price.

When a set of facts is appropriate to meet the requirements giving rise to potential majority shareholder vs. minority shareholder challenges, there are many paths a claimant may take. We are value-based attorneys at Jimerson Birr, which means we look at each action with our clients from the point of view of costs and benefits while reducing liability. Then, based on our client’s objectives, we chart a path forward to seek appropriate remedies.

To determine whether your unique situation may necessitate litigation, please contact our office to set up your initial consultation.

Frequently Asked Questions

1. What are the legal obligations of majority shareholders in a company?

Majority shareholders have legal obligations, including the obligation to act in the best interests of the company and its shareholders, to refrain from engaging in self-dealing, and to disclose important information to all shareholders.

2. What are the legal rights of minority shareholders in a company?

Minority shareholders have legal rights, including the right to inspect corporate records, bring a shareholder derivative action, and sue for breach of fiduciary duty or oppression.

3. Can majority shareholders be held liable for harm caused to minority shareholders?

Yes, majority shareholders can be held liable for harm caused to minority shareholders if they breach their fiduciary duty or engage in oppressive conduct.

Have more questions about a majority shareholder vs. minority shareholder challenge-related situation?

Crucially, this overview of majority shareholder vs. minority shareholder challenges does not begin to cover all the laws implicated by this issue or the factors that may compel the application of such laws. Every case is unique, and the laws can produce different outcomes depending on the individual circumstances.

Jimerson Birr attorneys guide our clients to help make informed decisions while ensuring their rights are respected and protected. Our lawyers are highly trained and experienced in the nuances of the law, so they can accurately interpret statutes and case law and holistically prepare individuals or companies for their legal endeavors. Through this intense personal investment and advocacy, our lawyers will help resolve the issue’s complicated legal problems efficiently and effectively.

Having a Jimerson Birr attorney on your side means securing a team of seasoned, multi-dimensional, cross-functional legal professionals. Whether it is a transaction, an operational issue, a regulatory challenge, or a contested legal predicament that may require court intervention, we remain a tireless advocate every step of the way. Being a value-added law firm means putting the client at the forefront of everything we do. We use our experience to help our clients navigate even the most complex problems and come out the other side triumphant.

If you want to understand your case, the merits of your claim or defense, potential monetary awards, or the amount of exposure you face, you should speak with a qualified Jimerson Birr lawyer. Our experienced team of attorneys is here to help. Call Jimerson Birr at (904) 389-0050 or use the contact form to schedule a consultation.