Are you having a shareholder or partnership dispute?
Get legal help now. A Minnesota shareholder rights attorney can protect your legal rights, whether you are the majority or minority owner.
The sad reality is that many small business owners have irreconcilable disputes, reach deadlock or impasse, cannot work with their fellow shareholders any longer, or wish to terminate the business relationship for some reason.
Hopefully, the parties have already entered into an appropriate Minnesota Buy-Sell Agreement, Minnesota Partnership Agreement, or Minnesota Shareholder Agreement governing the rights and responsibilities of each, and the procedure for winding up the business.
If not, this website is designed to help educate you regarding your rights in a "closely held" Minnesota business when the owners cannot agree.
After reading more about shareholder disputes in small businesses within the State of Minnesota, click on this link to schedule an Initial Minnesota Shareholder Rights Consultation with Minnesota shareholder rights attorney Craig W. Trepanier of the Trepanier MacGillis Battina P.A. law firm in Minneapolis, Minnesota. The consultation covers up to two (2) hours of legal assistance for $500. To schedule your initial consultation, please read the Terms & Conditions and contact the firm.
We represent individual shareholders (whether minority or majority shareholder) as well as corporations. We also associate with corporate legal counsel to represent individual defendants in Minnesota shareholder litigation when ethical conflicts of interest preclude the firm from representing all named defendants. We welcome inquiries from potential clients and attorneys alike.
WHAT ARE MINNESOTA MINORITY SHAREHOLDER RIGHTS?
If clearly worded contractual agreements have not been entered into by the owners at the outset, the shareholders in a closely held Minnesota corporation may have conflicting views about their legal rights. This can sometimes breed distrust, resentment, anxiety, and paranoia.
In other cases, the shareholders may be acting in good faith but simply disagree about the direction the company should take. This could lead to deadlock and legal paralysis. One or more of the shareholders may want to sell out or dissolve the business.
Shareholders in a closely-held corporation or LLC formed under Minnesota law typically owe "fiduciary duties" to one another. Thus, the majority owner cannot treat the minority owner(s) in a manner that is unfairly prejudicial to the reasonable expectations of the minority owner. Instead, the shareholders must treat each other in an open, honest, and fair manner that is consistent with their reasonable expectations.
In order to protect minority shareholders in closely held corporations, the Minnesota legislature has provided the courts with broad equitable authority to protect the interests of minority shareholders. See Minn. Stat. § 302A.751 ("Section 751"). Section 751 provides for the buy-out of a minority shareholder's interest when "the directors or those in control of the corporation have acted in a manner unfairly prejudicial toward one or more shareholders in their capacities as shareholders or directors . . . or as officers or employees of a closely held corporation."
If the parties have not entered into clear contractual agreements governing the right of the corporation to terminate the shareholder's employment, or governing redemption of the minority shareholder's shares of stock upon events such as resignation or termination of employment, the shareholders may be forced to sue each other to sort out the confusion in the event of a corporate breakup.
In cases of minority shareholder oppression, a Minnesota shareholder that has been treated in an unfairly prejudicial manner may have the right to sue the corporation and/or the majority shareholders for equitable relief including the forced buy-out of the minority shareholder's shares at "fair value" as determined by the court.
EXAMPLES OF MINNESOTA MINORITY SHAREHOLDER OPPRESSION:
According to the courts, the phrase "unfairly prejudicial" in Section 751 is to be interpreted liberally. See Pedro v. Pedro, 463 N.W.2d 285, 288-89 (Minn. Ct. App. 1990).
One commentator, who helped draft certain revisions to the Minnesota Business Corporation Act and Section 751, stated that: "The section is remedial in nature and should be liberally construed as an addition to the rights afforded non-controlling shareholders by law and the corporation's governing documents. The broad scope of Section 751 reflects the Legislature's trust in the ability of the judiciary to achieve equitable results on the facts appearing in individual cases." See Joseph Edward Olson, Statutory Changes Improve Position of Minority Shareholders in Closely Held Corporations, The Hennepin Lawyer, Sept. - Oct. 1983, at 11.
In deciding whether to order a buy-out, the courts should consider "the reasonable expectations of the shareholders" with respect to each other and the corporation. See Minn. Stat. § 302A.751, subd. 3a. Oftentimes, a shareholder's reasonable expectations include a significant voice in management and an opportunity to work. See Olson at 23.
Examples of minority shareholder oppression may include:
- being denied access to corporate and financial records
- having responsibilities unjustly stripped away
- being excluded from important corporate decisions
- being "squeezed out" or "freezed out" of the corporation
- refusal by the majority shareholder to declare profit distributions in order to force the minority shareholder to sell at a depressed price
- being unjustly terminated from employment without cause
- any other actions involving dishonesty, misrepresentation, or fraud
The rights of minority shareholders to challenge these oppressive actions is often called "minority shareholder rights" and can be very powerful, including the right to obtain a forced court-ordered buy-out at "fair value" and recovery of attorney's fees and court costs.
If the minority shareholder can demonstrate unfairly prejudicial conduct by the corporation or the majority shareholder(s), it is even possible that the court will disregard the valuation formula contained in any written buy-sell agreement or shareholder agreement in extreme cases of minority shareholder oppression. In other words, if necessary, the court can throw out the terms of the contract negotiated between the parties and has the power to value the company at "fair value" which is generally determined after the parties submit expert appraisals.
WHAT IS A MINNESOTA SHAREHOLDER DERIVATIVE LAWSUIT?
Sometimes, minority shareholders can be harmed by actions that injure the financial health of the corporation in general, as opposed to actions directed specifically at the minority shareholder. For example, the individuals controlling a Minnesota corporation (e.g., corporate officers, directors, or majority shareholders) may engage in self-dealing by misusing corporate funds, usurping corporate opportunities for their own personal gain, or entering into "sweet heart" deals involving the use of corporate funds to pay family members or other related entities under their control. Such actions may violate fiduciary duties owed to the corporation and have the effect of harming the corporation itself (and, indirectly, its shareholders).
If the controlling officers, directors, or shareholders have misused corporate funds for personal purposes, the other shareholders have the right under Minnesota law to start a shareholder's derivative suit. In such a shareholder derivative action, the shareholder objecting to the self-dealing or misuse of corporate funds sues the controlling officers, directors, and/or shareholder for the injury suffered by the corporation.
Once the Minnesota shareholder's derivative suit has been started, the Minnesota corporation has certain defenses which include the creation of an independent special litigation committee to investigate the merits of the minority shareholder's derivative claims. While shareholder derivative suits are similar to individual claims brought by minority shareholders, the procedures for asserting a derivative action are different. Failure to differentiate between individual claims versus derivative claims can be fatal to the lawsuit unless the proper procedures are followed.
Minnesota shareholder’s derivative lawsuits are complex. Whether you are a majority shareholder or minority shareholder, if shareholder derivative claims have been threatened or asserted, it is important that you hire a Minnesota attorney experienced in handling Minnesota shareholder’s derivative suits. A Minnesota shareholder's derivative suit attorney can help shareholders and corporations alike in battles over corporate funds and control.
DO YOU NEED HELP NEGOTIATING WITH YOUR MINNESOTA BUSINESS PARTNER?
If you want to negotiate with your Minnesota business partner over the winding down of your business, or if you have any other shareholder dispute, including "minority shareholder disputes" or "shareholder oppression" disputes, click this link and complete the online form to schedule an Initial Minnesota Shareholder Rights Consultation with Minnesota shareholder rights attorney Craig W. Trepanier of the Trepanier MacGillis Battina P.A. law firm in Minneapolis, Minnesota. Mr. Trepanier represents both majority and minority shareholders as well as corporations themselves. The consultation covers up to two (2) hours of legal assistance for $500. To schedule your initial consultation, please read the Terms & Conditions and contact the firm.
ARE YOU INTERESTED IN FILING A MINNESOTA MINORITY SHAREHOLDER RIGHTS LAWSUIT?
If you are a minority shareholder and you have a particularly strong case of unfairly prejudicial conduct, Trepanier MacGillis Battina P.A. law firm may consider taking your shareholder dispute on a "contingency" basis. This means that you will pay no legal fees unless there is a recovery, in which case the law firm will keep a negotiated percentage of the money recovered (such as the court-ordered buy-out of your shares at "fair value" along with other damages).
If you want a Minnesota minority shareholder rights case evaluation, click here to schedule an Initial Minnesota Shareholder Rights Consultation. Our success stories include settlements in excess of $1,000,000.00 on behalf of minority business owners whose rights have been violated.
HOW CAN A MINNESOTA SHAREHOLDER RIGHTS ATTORNEY HELP?
If you are having a shareholder dispute involving a Minnesota closely held corporation or limited liability company (LLC), a Minnesota minority shareholder rights attorney can help you in several ways. A Minnesota corporate shareholder rights attorney can help a minority shareholder demand the corporate and financial records to which they are entitled under Minnesota law. The lawyer can evaluate these records to determine if the minority shareholder has been unjustly denied profit distributions, decision-making authority, or forced out of the company. In addition, a Minnesota shareholder rights lawyer can review the corporation's records -- including any written buy-sell agreement -- to determine if there is a procedure for compelling the buy-out of the minority shareholder at an agreed-upon price or according to a written formula. A Minnesota shareholder rights attorney can help a minority shareholder, majority shareholder, or corporation negotiate over the buy-out of one of the shareholders. Finally, a Minnesota shareholder attorney can represent the shareholders and/or the corporation in court if litigation becomes necessary.
Minnesota shareholder rights attorney Craig W. Trepanier of Trepanier MacGillis Battina P.A. in Minneapolis, Minnesota represents individuals, corporations, minority shareholders, and majority shareholders in closely held corporations, limited liability companies (LLCs), and other legal entities throughout the Twin Cities and Greater Minnesota area regarding Minnesota shareholder disputes, Minnesota shareholder oppression, Minnesota minority shareholder rights, Minnesota shareholder squeeze-out, Minnesota shareholder freeze-out, Minnesota shareholder termination, Minnesota corporate deadlock, Minnesota corporate impasse, Minnesota corporate dissolution, Minnesota shareholder buy-out motions, forced buyouts, and buyouts for fair value or fair market value, Minnesota business disputes, Minnesota business partnership disputes, Minn. Stat. 302A.751, Minn. Stat. 322B.833, breach of fiduciary duty, unfairly prejudicial conduct, shareholder fraud, fraudulent inducement, fraudulent misrepresentation, quantum meruit, unjust enrichment, equitable accounting, constructive trust, unpaid profit distributions, corporate self-dealing, usurpation of corporation opportunity, Minnesota shareholder lawsuits, Minnesota shareholder litigation, Minnesota shareholder's derivative suits, and Minnesota special litigation committees, including representation of clients in Minneapolis, St. Paul, Apple Valley, Blaine, Bloomington, Brainerd, Brooklyn Park, Burnsville, Coon Rapids, Duluth, Eagan, Eden Prairie, Edina, Lakeville, Mankato, Maple Grove, Minnetonka, Moorhead, Plymouth, Richfield, Rochester, St. Cloud, Stillwater, Twin Cities, Woodbury and other cities within the State of Minnesota (MN) (Minn.).