For a time the administration of a corporation may proceed smoothly and without significant issues and disputes. However, over time, the interests of shareholders, managers, executives and others may diverge. In other scenarios a small group of activist shareholders may attempt to use the corporate governing process to effect change in the organization or to advance their own ends at the expense of other short- or long-term business concerns. In any case, shareholder disputes can threaten the cohesiveness and momentum of an organization. However, shareholders who find themselves in in difficult situations regarding dividends or the non-fulfillment of other obligations may have scant choice but to file a shareholder action to compel or stop certain actions from occurring.
Bill Heyman brings more than 20 years of experience handling complex commercial disputes and the ensuing litigation to his practice at the Heyman Law Office. Mr. Heyman believes in a client-focused approach to law and provides one-on-one individualized attention to clients while drawing on his diverse experience which includes significant practice experience at large institutional firms. To discuss how a lawyer of our legal team can protect your firm or assist in the pursuit of a shareholder lawsuit, call (410) 305-9287 or contact the firm online.
What Are Common Reasons Behind Shareholder Actions and Disputes?
While some disputes are simply inevitable, careful planning and preparation can reduce the likelihood that other problem arises or grow beyond the point where litigation or other proceedings are inevitable. Careful consideration of a number of questions can provide insights regarding potential issues and be the starting point for a road map to handle concerns of this type. Concerns may include issues such as the terms for a buy-sell agreement, the process for valuation, and the process that will occur when a minority shareholder’s employment relationship with the company is severed. An additional question to consider might include the steps that should be taken if a majority stakeholder fails to perform or takes improper action and diverts business to another operation or interest. For a closely held-corporations, a succession plan should be frequently considered and routinely updated to increase the likelihood of a smooth transition so that control of the company and its goals is not lost.
However, despite even the most thorough planning, not all dispute are foreseeable. While a thorough understanding of the organization’s corporate governance processes and structures is certainly advantageous towards resolving the concerns, in some cases legal proceedings may be unavoidable. Some situations are ripe for mediation or arbitrations. These alternative dispute resolution techniques can often expedite a settlement or decision saving the corporation time, money, and resources. Mediations and arbitrations can be binding or non-binding depending on the negotiated stipulated terms. In some matters, alterative resolution techniques may be less appropriate. In these situations, the matter may need to be litigated through the traditional litigation process. Mr. Heyman can assist shareholders or corporations with all of the above concerns and legal proceedings.
Commercial Lawyer Provides a Strategic and Deft Approach to Shareholder Oppression Concerns
A shareholder oppression claim is a common dispute to arise due to the utility of the claim for shareholders with concerns regarding compensation, management and the decision-making process, attempted shareholder freeze-outs, failure to provide adequate financial statements, and other serious concerns relating to the governance and finances of a corporation. Since the markets for shares of a closely-held business are rather limited, 
shareholders often do not have adequate divestment options to escape potentially oppressive actions. Thus, a shareholder oppression lawsuit based on a breach of fiduciary duty is often the vehicle shareholders use to affect change in the corporation. Thus, corporate board members should consider their actions through the lens of fiduciary duty owed to stakeholders. While the law governing such actions differs in various jurisdictions, common reasons for minority actions due to perceived shareholder oppression includes:
- Implementation of an inequitable stock redemption plan that unduly favors the interests of majority shareholders.
- Denial of minority shareholder role in decision-making process.
- Failure to pay dividends to shareholders when the corporation is obligated to do so and has the financial wherewithal to take such action.
- Compensation that is paid to majority shareholders as a de facto dividend when similar compensation is denied to minority shareholders.
- Improper use of corporate funds to pay the personal expenses and debts of majority shareholders.
- Acts designed, intended, or likely to result in the freeze-out of majority shareholders where the equitable share of investment is denied including termination of a shareholder’s employment.
Potential remedies to address the problems stated above may include compensation for damages suffered by the oppressed shareholder. In other situations an order for a right to redemption of the minority shareholder’s interest may provide a remedy. In till other actions, particularly those filed under a dissolution statue, dissolution may also provide a remedy to the shareholder. However, redemption at fair value is a significantly more common remedy.
Strategic Guidance from an Experienced Baltimore Shareholder Dispute Attorney
Shareholders facing minority oppression or other concerns can turn to the knowledge and experience of Mr. Heyman who can set forth a roadmap regarding potential remedies to their concerns. Likewise the managing or governing members of a corporation can also work with Mr. Heyman for guidance or representation in disputes brought by shareholders. To discuss how Mr. Heyman’s decades of corporate law experience or the expereince of another attorney on our team can work for you, call the Heyman Law Office at (410) 305-9287 or contact the firm online today.