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All posts tagged minority shareholders

Posted:
February 19, 2013
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Business Cases in the News: Shareholder Oppression

Business Cases in the News:

 

Shareholder Oppression  

 

     In the recent (unpublished) case of Berger v. Katz, Case No.: 293880 the Michigan Court of Appeals, the appellate court of Michigan, affirmed (agreed with) significant relief afforded to the minority shareholder. In doing so the Court of Appeals swept aside the argument of the Defendants that the minority shareholders were not entitled to relief under MCL 450.1489 because all of their decisions and conduct was authorized by the bylaws.  The Court of Appeals noted that even authorized and legal decisions could still be oppressive to the minority shareholders.

 

     In reaching their decision, the Court of Appeals looked at the statutory language:

 

MCL 450.1489 provides, in relevant part:

 

(1) A shareholder may bring an action in the circuit court of the county in which the principal place of business or registered office of the corporation is located to establish that the acts of the directors or those in control of the corporation are illegal, fraudulent, or willfully unfair and oppressive to the corporation or to the shareholder…

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(3) As used in this section, “willfully unfair and oppressive conduct” means a continuing course of conduct or a significant action or series of actions that substantially interferes with the interest of the shareholder as a shareholder. Willfully unfair and oppressive conduct may include the termination of employment or limitation on employment benefits to the extent that the actions interfere with distributions or other shareholder interests disproportionately as to the affected shareholder. The term does not include conduct or actions that are permitted by an agreement, the articles of incorporation, the bylaws, or a consistently applied written corporate policy or procedure.

 

     If you or a loved one are a victim of oppressive conduct, call Guy Vining of the Vining Law Group, PLC, for a discrete and no charge consultation. Elements of oppressive conduct found by various courts include: being denied notices, changes in bylaws and articles of incorporation, insider contracts, salary elimination, termination of employment, issuing stock without need the corporation, significant pay and benefit increases to those in control of the corporation and denying the minority shareholders a voice in management.

 

Guy Vining has practiced law throughout the state of Michigan. His office is located in the downriver city of Taylor where he primarily serves the Metro-Detroit area. He has represented shareholders in stock court actions including the Court of Appeals. All initial consultations are confidential and without charge. Please feel free to call.

Posted:
March 21, 2012
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Oppression of Minority Shareholders: What are Shareholder Rights?

Oppression of Minority Shareholders:

What are Shareholder Rights?


    As discussed in previous posts, a minority shareholder can bring an action against the directors and/or others that are in control of a corporation for illegal, fraudulent or oppressive conduct, MCL 450.1489.  Willfully oppressive conduct is defined by the statute as a continuing course of conduct or a significant action, or series of actions, that substantially interferes with the interest of the shareholder “as a shareholder.”

 

The question then arises as to what the interests of a shareholder are. In other words, what are the rights incidental a shareholder’s interests? Generally, speaking a shareholder’s rights in a close corporation consists of: the right to inspect the books and records and for a reasonable accounting; the right to vote and participate in management of the corporation; and, the right to receive a share of the profits of the business. These rights are based upon statutes and the common law of Michigan.

 

More recently, by amendment of the Shareholder Oppression Statute, MCL 450.1489, the Legislature has added employment security in certain circumstances. It has been amended to add the following language: “Willfully unfair and oppressive conduct may include the termination of employment or limitations on employment benefits to the extent that the actions interfere with distributions or other shareholder interest disproportionately as to the affected shareholder.”

 

These are the types of rights which if violated in a significant way or on a continuous basis may form a minority shareholder oppression case pursuant to MCL 450. 1489. In blog postings to follow we will examine some of the cases when oppressive acts have been found and not found under the shareholder oppression statute.

 

In the meantime, it is interesting to note that Michigan has a long history prior to the Shareholder Oppression Statute protecting minority shareholders. One of the interesting cases is Dodge Brothers v. Ford Motor, Co., 204 Mich 459 (1919). In that case the minority shareholders requested and received a court order requiring Henry Ford (majority holder) to declare and pay a significant dividend to the minority shareholders. The Michigan Supreme Court noted that Ford’s refusal appeared to be arbitrary because the company had consistent profits and was at the time cash rich. Apparently, Mr. Ford’s reluctance may have had something to do with keeping his competitors from receiving money that they would use to compete against him. In any event, in equity, because the purpose of an investment is to make money, the Michigan Courts for over 90 years now, have ordered dividends paid in an appropriate case.

[Guy Vining, an attorney, in metro-Detroit, maintains his office in Taylor, Michigan, where he serves the local communities and the tri-county area. If you or a family member of friend would like a no-obligation no cost consultation, just call or E-mail Guy Vining of Vining Law Group, P.L.C to schedule a meeting.]