Shareholder Litigation

Shareholders are individuals who hold a certain amount of stock in a corporation. These shareholders have numerous rights, including the ability to inspect the corporation’s records and books. Moreover, the controlling shareholders of a corporation must not abuse their power to the detriment of other corporation shareholders. When differences arise among shareholders – or between shareholders and the corporation – litigation can ensue.

Shareholder litigation can be costly and may take up a significant amount of time. A Birmingham shareholder litigation lawyer at Maxwell Goss Law can assist your business throughout the litigation process, in an attempt to bring about an efficient and favorable resolution to your dispute.

Shareholder Rights

Corporate shareholders have important rights, one of the most important of which is the ability to inspect corporate records and books at certain intervals and times. The corporation is required to maintain these records and make them available to shareholders of the corporation upon request. Possible records and books that shareholders may examine include the corporation’s profit and loss statements, balance sheets, and stock ledgers. Shareholders can also examine the corporation’s records and books that pertain to specific shareholder interests.

Shareholders, however, are not allowed unrestricted access to the corporation’s records and books that may reveal certain sensitive information, such as corporate trade secrets.

In some instances, litigation arises over shareholders’ ability to review and inspect corporate records. In cases where a protective order might prevent shareholders from accessing certain sensitive information, a state court may side with the shareholders where their interests are at stake.

Shareholder Oppression

Individuals who are the majority shareholders of a corporation have a duty not to abuse their power to the detriment of minority shareholders. Specifically, the majority shareholders of a corporation are not permitted to take part in activities that are fraudulent, illegal, or willfully oppressive and unfair.

When an employee who is a corporate shareholder is fired from his or her position, this may amount to shareholder oppression. Litigation is often used to determine whether the majority shareholders’ harmful actions may be labeled “oppression” – even when these actions resulted in a positive benefit to the company as a whole.

In cases where a court finds that shareholder oppression occurred, the court may be able to institute various remedies. For example, the court may require the controlling shareholders to reimburse salaries and benefits, rescind a contract that unreasonably favors the majority shareholders but that adversely affects the corporation, and/or order that a minority shareholder who was wrongfully fired is re-hired. Finally, the court may require a corporation to release a financial accounting of all of its activities.