How did a plaintiff prove the removal of a minority shareholder? What evidence was sufficient? Who had the burden? Even after Ritchie v. Rupe, plaintiffs will still face these challenges in other pleas. Therefore, it is necessary to examine how the burden of proof operated under the previous doctrine of shareholder suppression. A relatively common case is that the co-partners of a tightly held company all work in the company and are only involved in the company through salary, and then the situation changes, so that the pattern of economic participation, which everyone accepted in the past, no longer works fairly. Most often, it is because one of the shareholders no longer works in the company, whether due to dismissal, resignation, retirement, disability or death. At this point, there should be a fiduciary duty to rethink the current system of economic ownership and develop an alternative policy that allows everyone to participate equitably – normally this would mean distributing profits through dividends, but could also include payments for an advisory contract or other mechanism to the self-employed shareholder. In Braswell v. Braswell, the wife of a majority shareholder of a private company, received shares in the company following a divorce. The wife argued that the division of shares was not fair, as she was now a shareholder in a company controlled by her ex-husband.
The court noted that the company had never paid dividends before, but argued that both husband and wife had lived on the husband`s salary removed from the company and that it would have been costly and imprudent for the company to pay dividends before the divorce. “We do not believe that these facts give rise to a presumption that the company, acting through its employees and controlling shareholders, will not regularly declare and pay reasonable dividends. If they unlawfully refuse to do so, each minority shareholder has recourse. » 2. Urinary driving, hard or illegal; lack of honesty and fair management of the affairs of the Society to the detriment of some members; or a visible deviation from fair trade standards and a breach of fair play that any shareholder can invoke. Expert testimony in shareholder removal cases can be useful outside the context of stock valuation. In Colgate v Disthene Group, 85 Va. Cir. 286, 2013 WL 691105 (Va. Cir. Ct. 2012), the Court heard expert testimony on a wide range of liability and damages issues.
The effective use of experts can be crucial for litigation in a shareholding cancellation case, especially when it comes to the valuation of the minority shareholder`s shares. Judges and juries are not business valuators, and a plaintiff without sufficient evidence in the litigation of the value of the minority shareholder`s shares risks a judgment directed in favor of the defendant. An allegation of punitive behaviour towards a minority shareholder can be independently supported by evidence of various behaviours. The determination of the removal of a minority shareholder is generally based on more than one punitive act. Instead, the courts focus on one pattern of behaviour. It is this pattern of behavior that proves that “the probability that [the oppressive behavior] will continue in the future,” “the probability that it will continue in the future,” “the constant possibility of recurrence.” In summary, Ritchie is not necessarily the final word on all allegations of oppression by minority shareholders in Texas. A creative lawyer, if he has the right facts, could convince a trial court to apply the law of another state that still recognizes the oppression of a common law shareholder. In Redmon v. Griffith, the plaintiff`s argument that the defendants had diverted business opportunities was found to be appropriate to adequately demonstrate a request for removal of a minority shareholder. In Willis v. Donnelly, one of the repressive acts was the purchase by the majority shareholder of the properties on which the company had its facilities. The company had an option on the land, but the majority shareholder had the company surrender the option at closing.
The majority shareholder then increased the company`s rent to transfer all of the debt to the company. The Illinois wording and subsequent MBCA provisions, sections 14.30 and 805 ILCS 12.56, provide that a court may dissolve a corporation if “the directors or those controlling the corporation have acted, are acting or will act in an unlawful, oppressive or fraudulent manner.” A version of MBCA with this language exists in more than half of the states. Normally, an allegation that officers or directors of a corporation have received excessive compensation would be a claim owned by the corporation. However, a minority shareholder may also characterize the same behavior as the payment of “informal” or “constructive” dividends to controlling shareholders.