Maryland  |  Construction Law

Re: Rights of a minority stockholder in a family owned corporation

The first question when addressing issues of shareholder rights in a small corporation is whether there is any "shareholder agreement" or other contractual arrangements that will apply. Frequently, owners of small businesses will enter into "shareholder" agreements that will specifically identify the rights of the parties in circumstances such as those you have described (and such agreements are recommended as a standard practice by attoneys who set up corporations). If such agreement exists, then it must be reviewed carefully (probably with legal counsel) to determine your rights.

If there is no shareholder agreement or other contract governing the rights of shareholders, then it may be that a group comprising the majority of shares can take virtually complete control of the corporation (sometimes to the detrminent of minority shareholders).

If there is any significant financial issue at stake, it would make sense to contact an attorney as soon as possible. Frequently in such situations, there is need for emergency legal actions to be undertaken in order to preserve assets or otherwise maintain the status quo while the dispute is resolved.

I would be happy to chat briefly with you to help determine whether you should hire counsel immediately. Please feel free to contact me at:

Lawrence R. Holzman, Esq.

Joseph, Greenwald & Laake, P.A.

6404 Ivy Lane, Suite 400

Greenbelt, MD 20770

(301) 220-2200

fax (301) 220-1214

Re: Rights of a minority stockholder in a family owned corporation

The best place to start is to review all of the corporate governance documents applicable to the corporation you reference. Documents such as the corporate bylaws, buy-sell agreements, and/or other shareholder agreements (presumably, if collectively drafted by an attorney) should provide guidance with regard to the specific issues you mention. Second, I would consider consulting an attorney to aid you in your review of the documents and possible strategy(ies) as it is not uncommon in these types of situations for minority shareholders, to their detriment, to be "frozen out" of corporate affairs.

Re: Rights of a minority stockholder in a family owned corporation

Your strategy and tactics vary considerably based on an almost infinite number of variables. The corporate documents have much to bear upon your matter; however, such documents are typically not well drafted for small capital corporations. Much may be left unguided by corporate agreements with the shareholders. Minority shareholders taking control through tacit (i.e., informal agreement) is typical. As an adversely affected minority shareholder, you may have several strategies to employ. Consultation with an attorney is HIGHLY advised, do not delay as actions may be taken by the corporation that are not easily overcome.

Family owned corporations often encounter disputes that can rival the bitterness of corporate giants. Do not leave your interests unprotected.

G. Joseph Holthaus III, Esq.

(410) 799-9002

(410) 619-5918 (voicemail)