Shareholders in the state of Florida can be broadly categorized into two groups:
- Majority Shareholders: Individuals or entities that own and control over 50 percent of a company’s shares, and
- Minority Shareholders: Individuals or entities that own and control less than 50 percent of a company’s shares
Florida law grants majority shareholders the right to operate their business in just about any way they wish. Depending on the structure of the organization, they can name the board of directors, hire and fire employees, and decide when (and how) to distribute profits.
Minority shareholders, on the other hand, have far fewer privileges. They are generally limited to the following three rights:
- The right to vote in a board of directors election
- The right to request and review the organization’s financial and legal records, and
- The right to receive profit distributions if they are declared by the organization
As a general rule, the only way to expand upon these rights is with a written agreement between the shareholders.
Minority Shareholder Rights During Business Disputes
When an organization’s shareholders get into a dispute, it’s not at all uncommon for the majority shareholder to use their power to “punish” or “oppress” the minority shareholder(s). Shareholder oppression tends to come in the following forms:
- Removing the minority shareholder from their board of directors position
- Refusing to issue dividends, even though the organization is profitable
- Canceling contracts with the minority shareholder’s affiliate company, and
- Reducing the organization’s profitability by increasing the majority owner’s salary
There is, unfortunately, very little minority shareholders can do to prevent a majority owner from behaving in this way. However, they can pursue a remedy after the fact. To do so, they must file a lawsuit for the oppression of minority rights.
Through a lawsuit of this nature, a minority shareholder can seek monetary damages or even a court-ordered buyout of their shares. If a buyout is necessary, the court (or an impartial third party) will typically assess the fair market value of the shares.
Involved in a Shareholder Dispute?
Are you a minority shareholder who is being oppressed or unfairly treated by the majority owners of your company or any other shareholder dispute? If so, please do not hesitate to get in touch with the experienced business litigation attorneys at The Frazer Firm in Jupiter. We’ve been helping business owners in Florida resolve their disputes for years, and we are ready to aggressively protect your rights!
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