Alabama Shareholder Law Survey

Name: Best law firm in town for all of your business needs. Had the pleasure of working with Mr. Centrich and he was very helpful.
Item: Shareholder Oppression
Rating: 5
Author: Kendyl Grupp

What follows is a brief survey of Alabama shareholder law with a focus on minority shareholder rights and relief when those rights have been ignored or violated.

Hopkins Centrich is Greater Houston’s premier firm for shareholder oppression matters. Over the decades we have provided cutting edge, high quality, creative legal solutions for minority shareholders in Texas closely held corporations when their rights have been abused by the majority owners. We have also worked with clients in law firms across the country in all manner of cases where the rights of minority shareholders have been impinged on and they have suffered loss – economic, intellectual property, goodwill, and more.

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Minority Shareholder Rights in a Closely Held Company

Alabama is a Statutory State

Statutory states have adopted specific statutes governing minority shareholder oppression claims in corporations. Key characteristics of statutory states regarding shareholder oppression include:

Oppression statute - The state legislature has enacted a statute expressly addressing shareholder oppression causes of action.

Statutory remedies - The law provides statutory remedies for oppression, such as dissolution or a forced buyout of the minority's shares.

As a statutory state, Alabama has enacted statutory provisions governing derivative proceedings:

Statutory basis - Alabama has adopted a specific statute, Section 10A-2-7.40 to 10A-2-7.47 of the Alabama Code, that outlines the requirements and procedures for derivative proceedings.

Demand requirement - The statute requires the shareholder to first make written demand on the corporation before commencing a derivative proceeding, unless excused.

Stay of proceedings - The statute allows the corporation time to investigate the allegations and determine if pursuing the action is in its best interest.

Dismissal - The action can be dismissed if the board rejects the demand and the court finds the board's decision is protected by the business judgment rule.

Security for expenses - The corporation can request the plaintiff post security for reasonable expenses incurred in the proceedings.

Discontinuance or settlement - The court must hold a hearing and determine whether a proposed settlement or discontinuance is fair & reasonable to the corporation.

Payment of expenses - The statute specifies expenses and fees may be awarded to a successful plaintiff.

Applicability - The statute applies to both for-profit and nonprofit corporations incorporated under Alabama law.

Non-exclusive - The statute does not limit a shareholder's equitable or common law right to bring an action in the right of the corporation.

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Key Things to Remember in Alabama Shareholder Oppression Matters

There are several key aspects to shareholder actions under Alabama law that must be considered:

Standing - A shareholder can bring a derivative action if they owned shares at the time of the alleged wrongdoing or if the shares devolved upon them by operation of law.

Demand requirement - The shareholder generally must first make a written demand on the corporation to take suitable action, allowing 90 days to respond.

Termination of dismissed action - A derivative action cannot be discontinued, abandoned, or settled without court approval and notice to shareholders.

Proper plaintiff - The derivative action may not be maintained if it appears the shareholder does not fairly and adequately represent the interests of similarly situated shareholders.

Director conflict of interest - If a majority of directors are alleged to have participated in wrongdoing, demand on the board may be excused as futile.

Fees and expenses - Reasonable expenses including attorney fees may be awarded to the plaintiff out of any common fund recovered for the corporation.

Dismissal - The action may be dismissed by the court on motion if the plaintiff lacks capacity, standing or authority to pursue the action.

Security for expenses - The court may require the plaintiff to post reasonable security to cover litigation expenses incurred by the defense.

Corporate governance changes - Derivative actions often result in improved corporate governance even without a monetary recovery.

Hopkins Centrich, Your Shareholder Oppression Law Firm For Fraud and Misrepresentation Claims

Hopkins Centrich PLLC provides cutting edge, high quality, creative legal solutions for minority shareholders in Texas closely held corporations when their rights have been abused by the majority owners. Our attorneys and staff have decades of experience in virtually every aspect of business law in The Woodlands and Texas. We have designed and incorporated businesses, managed their every legal concern, engaged in litigation on their behalf, aided with mergers and acquisitions, as well as having managed mergers, acquisitions, and sales.

Hopkins Centrich knows Texas business law. We are uniquely positioned to help shareholders when they have amble cause to believe their rights are being violated. When we work with a client, our sole focus is on them. We take advantage of everything technology has to offer in order to optimize how we work. That gives us more time to spend with clients, more time to understand the issues, more time to negotiate and prepare for trial. We get that no one wants to contact a law firm unless they feel they absolutely must. When they do, it almost always means that ‘things have reached a head.’

The attorneys and staff of Hopkins Centrich understand what you are going through. We will make the process understandable; you will know what is happening with your case every step of the way and you will never have to track us down for answers.

Have You Experienced Minority Shareholder Oppression?

Minority Shareholder Oppression occurs when the majority shareholders act with prejudice, unfairness, and lack of probity towards the minority thereby frustrating their reasonable expectations as owners. Here is a concise but by no means exhaustive rundown of some of the key actions that may constitute oppression:

Denying voting rights

Denying access to books and records

Canceling minority shareholder meetings

Harassment, coercion, or intimidation tactics

Refusing to declare dividends or distributions

Amending governing documents to reduce minority rights

Terminating a minority shareholder's employment

Not allowing the minority to sell or transfer shares

Issuing more shares to dilute the minority's interest

Paying excessive compensation to majority owners

Denying benefits or privileges without justification

Engaging in self-dealing or related party transactions

Excluding the minority from management decisions

Making changes to bylaws or policies without consent

Diverting corporate opportunities from the company

Withholding information or providing false information

Misapplying or wasting corporate assets

If any of this applies to you, please contact us as soon as possible.

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How We Work

Hopkins Centrich is a team with a deep bench. All our attorneys have extensive litigation experience which they fully use when necessary.

Hopkins Centrich’s attorneys also have ‘big firm’ backgrounds. They formed our firm with the goal of retaining the best and most talented lawyers who would provide a greater and more personal experience for our clients.

We do this by using technology to its fullest. We utilize cutting-edge business processes and methodologies to assure that we can continue to deliver the highest quality legal services to our clients. This, in turn, allows us to respond promptly and efficiently to client needs, exceed project requirements, operate effortlessly with narrow timeframes, and develop innovative yet flexible legal solutions at competitive fees.

We are creative. We are agile. We quickly adapt to rapidly changing circumstances, including changes in the law.

Hopkins Centrich is dedicated to upholding the rights of minority shareholders. If you feel you are not being treated right and you are invested in a closely held company – money, time, labor, experience, intellectual property, etc. – please call us as soon as possible.

Our vision statement may sum it up best. We deliver highly skilled, ethical and aggressive legal representation to every client by:

Responding promptly to our clients’ needs.
Anticipating business and legal trends that may affect our clients.
Managing our clients’ matters in an efficient, caring and proactive manner.
Communicating regularly and clearly with our clients.

Alabama Shareholder Law Survey