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Fiduciary Rights of Shareholders Partners and Members

Date: 08/01/2015 | Category: Partnership Disputes | No comments


There are many complicated matters that may arise between minority shareholders, members and partners. If your partners want you out of the business, or if they want to limit distributions to you, they may stop at nothing to achieve their goal. It is common for partners to engage in oppressive business acts to inspire minority shareholders to leave.

Here are a few examples of oppressive actions majority partners may employ against minority shareholders:

  •  Disproportionate compensation Improper actions may include establishing compensation structures that favor the majority equity holders.
  • Withholding distribution Majority partners may knowingly withhold distributions from minority partners.
  • Restricted or denied access Minority partners who are being pushed out may find their access to books and records completely denied.
  • Improper lock-out Majority partners may claim that the minority equity holder should be locked out because of a wrongful act.
  • Diverted business assets The majority may even move assets and opportunities from the minority to a new entity controlled by the majority.

Fortunately for New Yorkers, there are statutory laws in place to protect minority equity holders. New York law requires majority members to provide a duty of good faith and loyalty to minority shareholders. That means that the majority must act in the best interests of the business at large and not just in the interests of any particular shareholder group. Issues arise when decisions are made that benefit majority shareholders and not the business itself.

Therefore, if the majority shareholders are acting in a manner that benefits them but hurts the business, you can take action. If you are a minority shareholder who is losing control because of oppressive acts, contact an experienced New York business attorney right away to learn about your legal options. If you are being pressured to leave through oppressive action, you must fight back before it is too late. They may be time to create a proactive plan and course of action that keeps you in play and protects your ownership interests.

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