Shareholder Oppression and Torts
Business torts refer to “wrongful acts committed by one business or person against another business or person that cause harm.” In the context of minority shareholders in closely held companies, these are actions that harm the company and, of course, the shareholder.
Characteristics of Business Torts
These are Some of the More Important Characteristics of Business Torts:
Cause harm to a business - The wrongful conduct must inflict harm, loss, or damages to a business entity. Personal injury alone is not a business tort.
Torts vs crimes - Business torts involve violations of civil law. They are not criminal acts, which would face criminal charges though, of course, in some circumstances they may be both.
Common law basis - Business tort claims arise under common law rather than being statutory violations.
Financial injury - The harm caused by business torts typically involve monetary or economic damages like lost profits, though non-monetary harm is also possible.
Remedies - The usual remedies sought are monetary damages. Injunctions to stop the tortious conduct may also be obtained.
Most common claims - Common business torts include unfair competition, trademark infringement, interference with contracts, fraud, and defamation.
Strict liability not required - Proof of intent or negligence is required for some torts, while others like unfair competition impose strict liability.
Assumption of risk - Consent to take on a known business risk can sometimes bar a claim under the doctrine of assumption of risk.
Independent duty - The parties must have an independent relationship or duty - a contract alone is insufficient.
Hopkins Centrich, Your Shareholder Oppression Law Firm
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, managed mergers, acquisitions, and sales.
Hopkins Centrich knows Texas business law. We are uniquely positioned to help shareholders when they have ample 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 you, more time to understand the issues, and more time to negotiate and prepare for trial.
We get that no one wants to contact a law firm unless they feel they absolutely have to. 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.
Types of Business Torts
It’s an unfortunate fact of business life that sometimes the majority owners of a closely held company do not act in the best interest of the company or shareholders. Sometimes this is manifested by a recognizable business tort, a wrong perpetrated by a majority owner that adversely impacts your ownership rights and equity.
These are some potential torts that can occur in a closely held company:
Breach of fiduciary duty - Majority shareholders, directors, or officers can breach their fiduciary duties owed to the minority shareholders and the corporation. This includes self-dealing, usurping corporate opportunities, etc.
Fraud - Majority shareholders or directors could commit fraud by making false representations about the company's finances, operations, etc. to benefit themselves over the minority.
Conversion - Misappropriating corporate assets or diverting them for personal use by the majority owners.
Self-dealing - Majority owners engage in unfair self-interested transactions with the company.
Conflicts of interest - Directors or officers take actions or have interests that conflict with the company's interests.
Misrepresentation - Majority shareholders or directors make false or misleading statements to induce the minority to act in reliance.
Tortious interference - Intentionally damaging relations between the company and a third party like a supplier or customer.
Defamation - Making false, damaging statements about the minority owners that harm their reputations.
Infliction of emotional distress - Intentionally or recklessly taking actions that inflict mental anguish on the minority owners.
Misappropriation of trade secrets - Disclosing or using the company's confidential information and trade secrets without authorization.
Corporate waste - Majority shareholders diverting corporate assets for unnecessary, unreasonable or unprofitable purposes.
The minority shareholders could potentially sue for these torts and recover damages if they can prove the elements required for each claim. Consultation with a business attorney is advisable.
Unjust enrichment - Majority shareholders could be unjustly enriched through excessive compensation, usurping business opportunities, etc.
Accounting malpractice - Company accountants could negligently or intentionally provide inaccurate financial information.
Legal malpractice - Attorneys retained by the majority owners could give negligent or fraudulent legal advice.
Breach of contract - The majority owners could cause the company to breach contracts with the minority owners or third parties.
Promissory estoppel - The minority relies on promises made by the majority, causing detriment.
Negligent misrepresentation - The majority carelessly provides the minority with incorrect information influencing their decisions.
Fraudulent concealment - The majority conceals essential information from the minority that should have been disclosed.
False imprisonment - Restricting the physical movement of the minority owners against their will.
Invasion of privacy - Violating the minority owners' privacy rights by intruding upon their solitude.
Harassment - Severe, pervasive harassment creating a hostile environment for the minority owners.
Civil conspiracy - Majority owners conspire together to injure the minority owners through unlawful, overt acts.
Neglect of corporate formalities - Causing the company to disregard important corporate formalities and procedures.
What to Do If You Think Your Minority Rights are Being Violated
First, do not believe anything you read online, or listen to someone who tells you that the Texas Supreme Court did away with Shareholder Oppression lawsuits. The Court merely limited some of the basis for bringing a Shareholder Oppression action. There are still many avenues to relief available, particularly where the majority shareholders have made decisions that are not In the best interests of the business.
Don’t wait. If you think your shareholder rights have been trampled on don’t hesitate to call. Don’t hope that things change, don’t let a matter fester, don’t try to solve the problem yourself through emails and letters and not-so-calm conversations. Contact us. The earlier you do, the better, there are deadlines for every legal action. The longer you wait, the fewer your legal options.
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.
