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Category Archives: Minority Shareholders

How to Protect Yourself When Things Fall Apart (Part III)

September 12, 2017

In Saunders v. Firtel, as in Cline v. Grelock, the two business partners were close friends. [1] Firtel was the sole owner of Adco, a pharmaceutical sales corporation and Saunders worked as a sales representative for a medical supply company.  In 1986, the two agreed to enter into a formal business relationship which included Saunders to obtain a 49% shareholder interest in Adco and to become an employee of the company.  This written agreement allowed for both of them to devote their time and efforts to the business and split an equal compensation and fringe benefits but also did allow Firtel to spend substantial time away from the business. … Read the rest

3 Tips for Selling a Minority Interest in Your Business

July 3, 2017

Sometimes it seems the best strategy for your business is to bring in an investor with a minority interest. Perhaps the investor provides much-needed capital or a service you want to keep. But giving up interest in your company – even a non-controlling share – can be difficult.

As I’ve covered in a previous blog, under the law, the minority investor typically is a fiduciary duty. The managers who control the business must do so in a way that is best for all the owners.… Read the rest

Shareholder’s Agreement Form

June 8, 2017

R. Shawn McBride recently spoke about the importance of using the correct documents for a shareholder’s agreement. Here is the transcript.

Hey, folks, it’s Shawn with you here. You may have seen my earlier videos on shareholder’s agreements or you might just generally be wondering, where do I get a shareholder’s agreement from? Where do I get hold of a good form? And here’s the problem. There is no one form.

A lot of people think that all legal documents are formulaic and I can just copy and paste.… Read the rest

Picking Your Business Partner: Three Critical Things to Think About

February 22, 2017

R. Shawn McBride recently published an article to the McBride For Business Blog on a topic that might be of interest: Picking Your Business Partner: Three Critical Things to Think About.

He discusses business partners who are looking to leave the business due to difficulty with their partner.

You can see the full article here.

This posting is intended to be a tool to familiarize readers with some of the issues discussed herein.  This is not meant to be a comprehensive discussion and additional details should be discussed with your attorneys, accountants, consultants, bankers and other business planners who can provide advice for your circumstances. Read the rest

Keys to Protect Your Business: The Laws of Empowerment To Excel in Your Business

January 4, 2017

R. Shawn McBride recently published an article to the McBride For Business Blog on a topic that might be of interest: Keys to Protect Your Business: The Laws of Empowerment to Excel in your Business.

He examines why it’s critical when putting plans together that there be an element of protection.

You can see the full article here.

This posting is intended to be a tool to familiarize readers with some of the issues discussed herein.  This is not meant to be a comprehensive discussion and additional details should be discussed with your attorneys, accountants, consultants, bankers and other business planners who can provide advice for your circumstances. Read the rest

New York Law Update: Shareholder Oppression and Forced Buyout (Post III)

December 1, 2016

When Piazza filed a lawsuit seeking judicial dissolution of the company based on oppression, Gioia Jr. responded that the action triggered Piazza’s obligation to sell his shares under the shareholders’ agreement.[1]  Indeed, the shareholders’ agreement provided that a judicial dissolution proceeding would be deemed a voluntary offer to sell and trigger buyout rights.  The court said, however, that such provision is not controlling “when the sale is the result of claimed majority oppression or other wrongdoing—in effect, a forced buyout.”  Under New York Business Corporations Law, there are two types of judicial dissolution proceedings—one under Section 1104 where there is corporate deadlock and another under Section 1104-a “to provide a remedy to minority shareholders who have suffered abuse at the hands of the majority and lacked a means for salvaging the value of their investment.”  For a shareholder agreement to trigger buyout rights, as Gioia Jr.… Read the rest

New York Law Update: Shareholder Oppression and Forced Buyout (Post II)

November 29, 2016

In Piazza v. Gioia,[1] Piazza and Gioia Sr. founded Kings County Waterproofing Corp. (KCWC) in 1979 and held 40% and 60% of the shares, respectively.  Gioia Sr.’s son also worked for the company eventually became a 1/3 owner, along with his father and Piazza.  Their shareholders’ agreement contained stock transfer restrictions and buyout provisions, which, among other things, gave the non-selling shareholder an option to purchase the selling shareholder’s shares at “the last stipulated price preceding the date of the notice to sell the shares.”  In 1996, Gioia Sr.… Read the rest

New York Law Update: Shareholder Oppression and Forced Buyout (Post I)

November 22, 2016

We write frequently about minority shareholder rights.  Really frequently.  We previously talked about Ritchie v. Rupe, a Texas Supreme Court case that made it harder for minority shareholders to bring lawsuits based on oppressive conduct by majority shareholders (see here).  We also discussed Bontempo v. Lare (available here), a Maryland case on remedies for shareholder oppression, which, in addition to dissolution, recognized equitable remedies, and Sneed v. Webre (available here), another Texas case, which held that the business judgment rule does not prevent minority shareholders of a closely held corporation from bringing a lawsuit on behalf of the corporation over the board’s objection. … Read the rest

All postings are intended to be planning tools to familiarize readers with some of the high-level issues discussed therein. No posting is intended to be a comprehensive discussion and additional details should be discussed with your transaction planners including attorneys, accountants, consultants, bankers and other business planners who can provide advice for your circumstances. This article should not be treated as legal advice to any person or entity.