A common problem in close corporations or small 2-3 member LLCs is what happens if there is a dispute between the shareholders. A common misconception is that majority ownership allows owners to do whatever they want with “their” company and that everyone else is along for the ride. It would appear that a minority shareholder would have very few rights to keep a majority shareholder from altering the company’s business plan and running the business into the ground using their 51% stake. Fortunately, some protections under North Carolina law exist for minority shareholder disputes.
Our attorneys recently represented a minority shareholder in a start-up where the majority shareholder was breaching the fiduciary duties owed to his fellow owners. We were able to force a buy-out of shares at a value substantially more than the appraised value. We also recently represented a minority shareholder in a SAAS start-up attempting to block him from exercising his right to purchase additional company shares. After significant litigation, the majority allowed our client to purchase the shares poised to soar in value.
North Carolina law allows a minority shareholder to bring a lawsuit that could allow a Court to order the dissolution and sale of the company assets or a forced buy-out of the minority shareholder to protect the rights of an individual in a close corporation. If the minority shareholder can prove that they had reasonable expectations that were known or assumed by other shareholders, that those expectations had been frustrated, that these frustrated expectations were out of the shareholder’s control and that the specific circumstances of the company require equitable relief from the Court, a minority shareholder can gain protection for their investment from the control of the majority ownership.
Maginnis Howard is a civil litigation law firm that serves clients across North and South Carolina in minority shareholder disputes. We also handle select cases throughout the state. You may contact Maginnis Howard at (919) 526-0450 to speak with a civil lawyer with experience in commercial litigation matters. You can submit a new case inquiry by visiting our contact page here.