As a Corporate business Lawyer in Atlanta, Georgia, I am well aware the majority of the businesses in the United States are Close Corporations. Georgia Close Corporations are classified as having a maximum of fifty shareholders, no publicly traded stock, and active management by shareholders. Because Close Corporations usually employ the shareholders, these companies generally have a more relaxed management style. The downside is that this management model puts the minority shareholders in a situation where they quickly can be faced with Shareholder Oppression, also commonly referred to “squeeze out” or “freeze out” tactics. When this situation goes unchecked by the Minority Shareholders, this typically results in a negative impact on the minority shareholders and can lead to their termination of employment with the company.
When employed with a Close Corporation, income from employment and the input your Close Corporation shares allow the shareholder, is likely the most valuable stake that minority shareholders have. Shares held have no value on the open market. That, coupled with the fact that majority shareholders are unlikely to buy the minority’s shares at a fair price, leaves the minority shareholders with little or nothing upon being terminated.
The good news is that minority shareholders in Close Corporation have significant rights.
There are legal protections in place, which Close Corporation Shareholders can use to defend their rights. Many are as follows:
• Retaining an Atlanta Corporate Shareholder Attorney is the best route to protecting your Close Corporation interests.
• In the alternative, Business Law statutes in Georgia do provide protection for minority shareholders faced with this situation. Just as in ordinary corporations, all shareholders in Close Corporations have the right to inspect the documents pertaining to the company, including, but not limited to, bylaws, shareholders meeting minutes, documentation of actions taken outside of meetings and resolutions related to share classification.
• In the case of wrongdoing, documents discovered during inspection can provide the required evidence to file a lawsuit against the company.
• Georgia law states that the majority shareholders have a Fiduciary Duty to the minority shareholders, allowing minority shareholders to sue for dissolution of the Close Corporation when these duties are not fulfilled. These suits can be filed if the majority shareholders have acted are acting or are expected to act in an illegal, fraudulent, oppressive, or unfair fashion toward the minority.
• Minority shareholders also can sue for fair valuation of their shares.
Whatever the circumstance, it is critical to seek an Atlanta Corporate Business Attorney experienced in Shareholder Actions. Having a properly drafted operational agreement can prevent these types of disputes from developing, but if conflicts do arise, an Atlanta, Georgia Corporate Lawyer with experience in Corporate and Shareholder proceeding will ensure that all possible legal avenues are pursued to help Minority Shareholders receive fair treatment and compensation under Georgia Law.