Officers and directors of a corporation have a duty to act in the best interest of the corporation and ALL of its shareholders. They may not oppress the rights of minority shareholders, that is, they may not benefit at the expense—or to the exclusion—of the rights of minority owners.
Shareholders are legally protected under Colorado law in the following ways:
- Shareholders will receive a fair price for their shares;
- The corporation will provide shareholders with accurate information;
- Shareholders will be informed about the sale of substantial corporate assets;
- The corporation will act to promote the purpose of the corporation;
- The corporation will not take actions that benefit a group of shareholders at the expense of another group of shareholders;
- Shareholders will be told about material information (negative and positive) when entering into a transaction with the corporation.
Absent these protections, a minority shareholder’s investment and expectations would be subject to the whim and benefit of those in control of the corporation. The law protects all shareholder rights and, in particular, requires heightened protection for minority shareholders.
These duties are heightened in a closely held corporation (a corporation owned exclusively by a closed, small group of individuals). In a closely held corporation, those in control are like partners in a partnership – they owe the highest degree of loyalty and trust, are required to exercise good faith, and may not use their power to harm the other shareholders.
Conflicts between the owners in closely held businesses are common and very disruptive, mostly because owners of a closely held business are often its primary decision makers. However, they are often also early investors, old friends, family members and/or longstanding employees and rarely have depth of knowledge and expertise of a large corporation’s elected board of directors. Therefore, an owner of a closely held business typically has more vested, personally and financially, than the traditional corporate decision maker. The decision-making authority in a closely held business commonly rests in the hands of a majority owner, or a few acting in concert, leaving those with a non-controlling interest – minority owners – subject to the discretion of the controlling majority.
What if your partner, partners, or fellow shareholders oppress you by locking or forcing you out? If this is your situation, it is important that you know your rights as the majority, minority, or shared owner of the business; you also need to know what the potential recourse might be.
Ownership, partnership, and shareholder disputes can cause you an enormous amount of stress, money, and time. The shareholder oppression lawyers at Robinson & Henry have the skills and experience to help you mitigate all three. If you are a shareholder or minority owner of a corporation who has suffered at the hands of other shareholders or the corporation itself, you may be entitled to money damages. Contact the experienced commercial litigation attorneys of Robinson & Henry at 303-688-0944 for an assessment to discuss your rights as a shareholder.