Majority Shareholder Duties in a Closely Held Company
A majority owner in a closely held business owes important duties and obligations to the company and minority shareholders including, but certainly not limited to, the fiduciary duties of care, loyalty, and good faith.
This means the majority owner(s) must exercise reasonable care and prudence in company decisions, place the company's interests first by avoiding unreasonable self-dealing and conflicts of interest, and act transparently and ethically in dealings with the corporation and minority owners. They must not use their majority control in an unjust, unlawful, or oppressive manner against the minority or in opposition to the company’s best interests.
Minority shareholders in closely held companies rely on the good faith of the majority owners to operate honestly, ethically, and with the best interests of the company at heart. At all times. Minority shareholders have entrusted their money, time, intellectual property, ideas, and much more into these companies with the express understanding that the majority will do what they are obligated – ethically and by law – to do.
Unfortunately, it doesn’t always work out that way. Minority shareholders can find themselves on the outside looking in, cut off from information and their investment.
The Primary Duties of Majority Shareholders
Here are a few of the primary duties of a majority shareholder in a closely held business:
Duty of care - Majority shareholders have a duty to make informed decisions in the best interests of the corporation. They must exercise reasonable care and prudence.
Duty of loyalty - The majority shareholder must put the interests of the corporation first and avoid conflicts of interest and self-dealing.
Duty of good faith - Majority shareholders have an obligation to act ethically and transparently in their dealings with the company and minority owners.
Fiduciary duties - Majority shareholders have fiduciary duties because they can control corporate decisions.
Confidentiality - The majority shareholders should keep sensitive company information confidential.
Corporate formalities - The majority shareholder should ensure the company adheres to all legal formalities.
Avoid oppression - The majority shareholders cannot exercise their control in an unjust or harmful way toward the minority.
Equal treatment - The majority shareholder must not discriminate against the minority shareholder.
Compliance with laws - The majority must ensure legal and ethical compliance by the company.
Disclosure requirements - The majority shareholders must comply with all financial reporting and disclosure requirements.
Adherence to corporate documents - The majority shareholder must comply with by-laws, shareholder agreements, and other governance documents.
The majority shareholder is in a position of trust and must act fairly. Failure to fulfill duties can lead to liability.
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.
