Minority Shareholder Rights to Information
Minority shareholders in closely held companies have the right to access the company’s information, records, and financial statements. These are critical rights which, when exercise, can forestall potential problems – the kind of problems that can destroy your equity and years of work.
These rights are yours as a minority shareholder. When they are denied to you by the majority shareholders you may have a cause of action to compel them to act. Not doing so may well lead to future, serious, problems.
Protections for minority shareholders are critical, as the majority owners otherwise have full control in a closely held corporation.
Closely Held Company Minority Shareholder Rights to Information
Minority shareholders in a closely held corporation have certain rights to access company information, records, and financial statements. Key aspects of a minority shareholder's right to information include:
Right to inspect books and records - Minority shareholders have a right to inspect the company's books, records, and minutes of board/shareholder meetings. This applies to accounting records, shareholder lists, bylaws, etc.
Access to financial statements - Minority shareholders are entitled to review the company's financial statements and records, including annual/quarterly financial reports.
Tax returns - Minority shareholders generally have the right to inspect corporate tax returns. This may require signing a confidentiality agreement.
Documents impacting shares - Minority shareholders can access documents like shareholder agreements that directly impact their shares and rights.
Fiduciary right of access - Because directors/majority shareholders have a fiduciary duty, they must provide information upon request.
Limitations - Access rights are usually limited to purposes reasonably related to the minority's interest as a shareholder.
Reasonable notice - Minority shareholders must provide reasonable advance notice of their intent to inspect the records.
Time and place - The company can specify reasonable date, time, location and manner restrictions for inspection.
Fees - The company may impose reasonable fees associated with gathering and reproducing requested documents.
Confidential data - Trade secrets and attorney-client privileged information can be withheld.
Corporate formalities - Minority shareholders can inspect documents like director/shareholder meeting minutes to ensure proper corporate formalities are followed.
Pending litigation - If there is pending litigation, the minority may have broader rights to obtain discovery of relevant corporate documents and communications.
Documents affecting value - Minority shareholders have a right to access documents that may impact the value of their shares.
Derivative actions - Information gathered by inspecting documents can support a derivative lawsuit on behalf of the company.
Shareholder agreements - Shareholder agreements may provide additional information access rights beyond what state corporation laws provide.
Right to digital copies - Minority shareholders can often request digital copies of documents like emails, data files, and electronic records.
Director communications - Minority shareholders may be able to access communications between directors relating to company management.
Conditional access - Courts can impose reasonable conditions like confidentiality orders as a prerequisite to document inspection.
Refusal letter - If inspection is denied, the minority shareholder can demand a written refusal letter stating specific reasons.
Bad faith denial - Unreasonable denial of access rights may constitute a breach of fiduciary duty or oppression of the minority.
If the company refuses inspection or imposes unreasonable conditions on document access, do not wait. Call us as soon as possible.
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.
