Are you a minority shareholder in a California-based corporation facing unequal treatment, exclusion, or downright oppression by the majority shareholders? If so, it’s crucial to understand your rights and the legal recourse available to you. In this comprehensive guide, we will delve into the issue of shareholder oppression in California, the rights you possess as a minority shareholder, and what to do if those rights are being violated.
What is Shareholder Oppression?
Shareholder oppression occurs when the majority or controlling owners of a corporation take actions that unfairly prejudice the minority shareholders. This can also happen in limited liability companies (LLCs) and partnerships. Oppressive conduct can include (but is not limited to) the following:
- Diverting corporate opportunities
- Diluting share value
- Restricting access to crucial business information
- Discriminatory treatment in profit distribution or employment
Your Rights as a Minority Shareholder in California
California law offers several protective mechanisms for minority shareholders, some of which are:
- Access to Information
Under California Corporations Code § 1600, you have the right to inspect the accounting books, records, and minutes of proceedings.
- Fiduciary Duty
Majority shareholders owe a fiduciary duty to minority shareholders. This means they must act in the best interest of the company and all shareholders, not just their own interests. If the controlling shareholders breach their fiduciary duties, the minority owners may seek relief by filing a lawsuit against the controlling owners.
- Derivative Actions
As a minority shareholder, you have the right to bring a derivative action on behalf of the corporation if the company’s directors or majority shareholders are acting against the company’s best interest or are causing damage to the business.
- Buyout Rights
In some cases, you may have the right to force the company to buy out your shares at fair market value. Buyout rights are typically governed by the written agreements between the shareholders.
- Dissolution of Corporation
If the controlling shareholders’ conduct is sufficiently egregious, the courts may order dissolution of the corporation.
Legal Remedies for Shareholder Oppression in California
Every case is different, but these are some of the legal remedies that might be available to minority shareholders who bring a claim for shareholder oppression.
- Injunctive Relief
In some cases, you may be entitled to an injunction to prevent the majority from making oppressive actions.
- Damages
If you have suffered financially due to the oppressive conduct, you may be entitled to monetary damages.
- Inspection of Records
If the majority shareholders are refusing to share corporate records, the court may enter an order requiring that they allow you to inspect these documents.
- Dissolution
In egregious cases, the court may even order that the corporation be dissolved and its assets be distributed among the shareholders.
How to Get Legal Help
If you believe you are a victim of shareholder oppression in California, it’s essential to seek professional legal advice as soon as possible. In navigating the complex legal landscape surrounding shareholder rights, experienced guidance can make all the difference in securing a favorable outcome.
Are you a minority shareholder facing oppressive conduct in California? Our law firm specializes in representing minority shareholders. Contact us today to schedule a consultation and protect your rights.