Shareholder Disputes

Chicago and Illinois Shareholder Dispute Lawyer

Businesses that have more than one owner may, at some point, face a shareholder dispute. What is best for the company may not be what is best for an individual owner, either financially or in terms of the company’s direction. When shareholders have a dispute, this can result in missed opportunities and costs. Some frequent conflicts involve breaches of fiduciary duty, self-dealing, minority shareholder or oppression actions, derivative actions, management compensation, failure to pay dividends, appraisal rights, and unfair buy-out agreements. In many cases, the business and an owner may need to be represented separately.

Shareholder Buy/Sell Agreements

Many closely held corporations have shareholder buy/sell agreements to deal with the possibility that a shareholder will want to sell his or her shares, will get divorced, or will pass away. Often, the market for these shares is restricted. Without an agreement, non-selling shareholders can find themselves working with a third party with whom they would prefer not to work. Typically, the agreement allows other shareholders the right of first refusal when a shareholder wants to sell and requires other shareholders to purchase a leaving shareholder’s share under certain circumstances, such as death. In some cases, despite a written agreement, there may be further disputes over the selling of shares. For example, if the agreement fails to clearly specify how shares will be valued, including the issue of goodwill, a leaving shareholder may disagree on the worth of the shares to be purchased by the other shareholders.

Fiduciary Duty to Shareholders

Officers and directors of publicly held corporations owe a fiduciary duty to shareholders, employees, and their employers. They must make certain disclosures and adhere to high standards, acting in the best interests of other people. If instead, they pursue their own best interests, they are committing a breach of fiduciary duty.

Breaches of Fiduciary Duties

Common ways fiduciary duties can be breached include: when bribes are accepted, commissions are accepted without approval, conflicts of interest arise, or directors steal from the company and pursue corporate opportunities for their personal benefit. Shareholders can file a joint lawsuit against the leaders of the corporation for breaching their fiduciary duties.

Shareholder Agreements Limited Under Illinois Law

Shareholder agreements usually regulate the behavior of shareholders towards each other and the corporation. While shareholders have wide latitude to create their own terms for how various events will be handled, there are limitations under Illinois law. For example, minority shareholders of closely held corporations have special protections against oppression by majority shareholders.

Oppressive Conduct Toward Minority Shareholders

Oppressive conduct can include freezing minority shareholders out of meaningfully participating in a close corporation, withholding dividends, improperly terminating management positions, taking disproportionate shares of profits, withholding access to the corporate books, or some combination of these behaviors. The Illinois Business Corporation Act allows a buy-out when a minority shareholder sues a majority shareholder for oppression, waste, failure of corporate purpose, or fraud.

Protecting Your Interests during Shareholder Disputes

Concerned about a shareholder dispute in Chicago or elsewhere in Illinois? Let the experienced shareholder dispute lawyers at the Voelker Litigation Group help you explore your options.

Voelker Litigation Group: Unparalleled Skill & Service!