While the “owners” of a publicly traded company have the benefit of selling their shares at any time and for any reason, minority shareholders of closely held companies generally do not have the same flexibility. In closely-held ventures, there is no shortage of potential issues that could arise between minority and majority shareholders. From issues of perceived suppression and mismanagement to general discontent about the operation of the business, minority shareholders can easily find themselves at logger heads with majority/controlling shareholders with no easy way to quickly liquidate their interests. Closely held companies do not have the flexibilities of being able to trade their shares on the open market. Further, interests in closely held companies are often subjected to transfer restrictions, further exacerbating the difficulties of easily and quickly selling a shareholder’s shares. That said, in Wisconsin, under certain circumstances, minority shareholders are not totally devoid of options. In Wisconsin, a shareholder may petition a court to dissolve the company entirely where the directors are deadlocked in the management of the corporate affairs, or where the directors have acted in a manner that is oppressive.
Although the underlying law provides a rather drastic remedy for minority shareholders by requiring the dissolution of the company, continued creativity by courts and litigants have allowed minority shareholders to benefit while maintaining the company’s existence. Short of pursuing the “nuclear” option (that is – dissolution), minority shareholders may use their rights to seek dissolution as leverage to get majority owners to come to the table to negotiate a buy-out. However, a buy-out is not the only remedy available. Courts have also employed less drastic resolutions when litigating parties can repair their ongoing relationships to salvage their partnership. For example, shareholders may agree to appoint provisional directors to resolve deadlock and enjoin specific acts of the majority. The options and strategies available to a dissatisfied minority shareholder will obviously depend on the particular circumstances at play; nevertheless, there are options short of throwing in the towel.
Considering legal action to protect your rights as a minority shareholder is an effective way of combatting the oppression of a majority shareholder group. Speaking with an attorney can help you to best prepare and navigate the corporate formalities and arrive at the best possible outcome to protect your equity interests. The attorneys at OVB Law & Consulting, S.C. are knowledgeable in shareholder disputes and will advocate on your behalf to prevent a majority strong-arm from forcing you out of your company.
