As a minority shareholder in a company, an individual has likely experienced frustration over how little power they have regarding decisions made by the company in which they have invested. Although they may feel helpless, minority shareholders do have certain rights and legal protections. The following is a summary of certain basic rights of minority shareholders:

The first thing a minority shareholder should know is that the company’s majority shareholders and directors have a duty to act in the minority shareholder’s best interests and in good faith. There is an expectation that, as part of their fiduciary duties, they will avoid conflicts of interest, act fairly, and not engage in behavior that might harm minority shareholders. If they fail to uphold this duty, the minority shareholder can take legal action, and the courts may grant damages or require the majority to take action to remedy their failures.

  • If a minority shareholder believes that the majority shareholders have excluded them from management decisions or have unfairly distributed profits, they can claim that their interests have been unfairly prejudiced and seek an oppression remedy. This may include ordering the majority to buy the minority shareholder’s shares at a fair value, reversing certain decisions, or even dissolving the company.
  • In cases where controlling shareholders or directors refuse to take action for wrongs committed against the company, minority shareholders have the right to pursue a derivative action. This means that they can bring a lawsuit on behalf of the company.
  • If a minority shareholder believes that the company is being run in a way that unfairly prejudices their interests, such as through mismanagement, improper issuance of shares, or exclusion from decision-making, they can seek relief through an unfair prejudice petition.
  • Minority shareholders can collaborate with other minority shareholders to file a class action lawsuit over the harm they have collectively suffered.

Minority shareholders should also keep in mind that they have the right to access certain company information, including minutes of meetings, financial statements, and other records. If access to this information is denied, they can seek a court order to compel its production. Furthermore, minority shareholders have the right to petition for the wind-up of the organization if it seems like the appropriate and equitable course of action, such as in cases of deadlock in decision-making or serious mismanagement.

George W. Bodenger, Esquire of the law firm, Law Offices of George W. Bodenger LLC, has significant experience in representing minority shareholders in disputes of this type. For more information, please contact George at 610.212.5031 or at gwb@bodengerlaw.com.