Directors Rights in a Closely Held Company
Directors of closely held companies have rights that they are, in a sense, required to enforce on behalf of themselves, all the shareholders, the management team, and, not least, the company itself.
Closely Held Company Minority Shareholder Rights and Transfer of Ownership
Here are some common rights held by directors in a closely held corporation:
Manage the business - Directors have the right to make decisions and exercise judgment over managing the corporation's business affairs.
Call board meetings - Directors can call and establish agendas for board meetings.
Receive information - Directors are entitled to receive financial reports and other information about the company's operations.
Vote on corporate matters - Directors have the right to discuss, deliberate and vote on resolutions and corporate actions.
Appoint officers - The board of directors has the power to appoint corporate officers like the CEO and CFO.
Declare distributions and dividends - Directors have authority to declare shareholder dividends and distributions.
Review corporate records - Directors have a right to inspect the company's books, records, contracts and information.
Receive reasonable compensation - Directors may receive reasonable compensation for their board services.
Reimbursement - Directors are typically entitled to reimbursement from the company for reasonable meeting and travel expenses.
Elect board leadership - Directors can vote to elect or remove directors who serve as board chair, lead director, or other leadership roles.
Ratify certain transactions - Directors may have the power to ratify significant corporate transactions or acts.
Rely on experts - Directors can reasonably rely on information provided by management, counsel, auditors, etc.
Obtain counsel - Directors can retain legal counsel and other professionals to advise the board.
Fiduciary duties - Directors owe duties of care and loyalty to the corporation and shareholders.
Duties and Responsibilities of Directors of Closely Held Companies
Here are some of the key responsibilities of directors in a closely held corporation:
Fiduciary duties - Directors have fiduciary duties of care, loyalty and good faith to the company and its shareholders. This includes acting in the best interests of the company.
Strategic oversight - Directors are responsible for reviewing and guiding the company's overall strategy, mission and vision.
Financial oversight - Directors oversee major capital expenditures, budgets, financial reporting and internal controls.
Risk management - Directors identify and monitor material risks facing the company and ensure implementation of risk management policies.
CEO oversight - Directors are responsible for selecting, evaluating and if necessary terminating the CEO.
Succession planning - Directors plan for CEO and senior management succession.
Legal and regulatory compliance - Directors ensure the company meets its legal obligations and properly reports to regulators.
Corporate governance - Directors establish and oversee corporate governance policies and shareholder meeting procedures.
Conflict of interest - Directors must disclose any conflicts of interest and refrain from self-dealing.
Information review - Directors should reasonably review information provided to the board and request additional materials as needed.
Committee service - Directors serve on board committees such as audit, compensation, nominations etc. as deemed necessary.
Meeting attendance - Directors should make reasonable efforts to attend all board and committee meetings.
The condensed version: directors help guide the corporation by providing independent oversight and judgment.
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.
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.
