One of the more difficult – and expensive – issues that can affect a small business arises when the owners no longer agree on how to conduct the business. When this happens, oftentimes the proverbial gloves come off and the lawsuits start shortly thereafter.
Over the course of the past several weeks on The Business Forum Show, Kevin Hunter and I discussed various shareholder issues that can affect small businesses.
First up was a shareholder’s right to employment and the fiduciary duties owed by owners of a closely held business to one another. The preeminent Minnesota case dealing with these concepts is the case of Pedro v. Pedro. Click here to listen to our discussion.
Next up was dissenter’s rights, a very powerful “arrow in the quiver” for minority owners to protect their rights against majority owners who could otherwise outvote them. Not all states provide for dissenter’s rights (Minnesota, however, does). Click here to learn more.
Next in the series was “Dealing with Deadlock Issues.” 50-50 ownership sounds great at the start of a business, but if the two owners are no longer on the same page, watch out because it’s likely going to get ugly. Click here to listen.
Finally, we closed out our series by discussing shareholder derivative suits. A shareholder derivative suit is a lawsuit brought by a shareholder on behalf of a corporation against a third party. Often, the third party is an insider of the corporation, such as an executive officer or director. Shareholder derivative suits are unique because under traditional corporate law, management is responsible for bringing and defending the corporation against suit. Shareholder derivative suits permit a shareholder to initiate a suit when management has failed to do so. Click here to listen.