Some deviant thoughts on minority shareholder rights

This October will be the 12th year that I've run a C-class corporation.  That means stockholders and what not.  As a result, I have long been familiar with the rights and priviledges of stock holders, even minority ones.

In 12 years of business, I don't think anyone could find a single disgruntled business partner.  That is, in 12 years, no one we've worked with has ever expressed any dissatisfaction with how they were treated. So even though we're "evil capitalists" I think we've tried to be ethical, evil, capitalists.

But what if we started firing people left and right who owned stock? Maybe our reasons were legitimate. But what woudl the rights of the minority shareholder be?

Unlike public corporations, private corporations (closely held corporations) do have to tip toe a bit on how they treat their shareholders. The majority shareholders have to treat minority holders "fairly", "honestly", and "openly".  It is called the "fiduciary" duty.  Officers, board of directors, are even more liable -- legally -- to treat minority holders fairly.

The courts have ruled already on what happens to private corporations who violate these rules.  The relief has included:

· Dissolution of the corporation;

· Ordering a buy-out of the minority shares;

· Appointment of a provisional director, custodian or receiver;

· Rescinding corporate acts unfair to the minority;

· Awarding damages to minority shareholders.

Many private corporations have discovered that they cannot just walk over minority holders. Having 51% control of a company, for instance, doesn't give you the ability to go hog-wild.  As distasteful as it often is for majority shareholders, major corporate decisions have to be documented, minutes included from meetings, with minority share holders.  I couldn't, for instance, simply terminate a significant shareholder of the company without a formalized vote and ample documentation (heck, I can't even fire employees without ample documentation).

The best route to take with shareholders is to just set your company up with a formalized ethical business practices.  Individual actions, even ones that the officers feel are perfectly just and right, can be interpreted to be unethical and judged illegal. That is why openness with shareholders is key.  Document. Document. Document.  And openness between shareholders.