February 29, 2012 Articles

Shareholder Oppression and Enhanced Fiduciary Duties

Lawyers representing a close corporation are well served to understand the common-law fiduciary duties and statutory rights and obligations in the governing jurisdiction.

By David E. Lieberman

While today’s political buzz phrase, “class warfare,” seems unlikely to spill over into corporate governance jurisprudence, it arguably and only half-facetiously fits in the sizeable body of law addressing shareholder disputes in closely held corporations. In fact, courts, legislatures, and scholars considering the unique characteristics of close corporations have long used a term with similar overtones—“oppression”—to describe exploitive efforts by controlling shareholders to freeze minority shareholders out of the management or profits of a close corporation. Attention to shareholder oppression has spawned enhanced fiduciary duties owed to shareholders in close corporations that have no analogue in the context of publicly traded firms, along with direct common-law and statutory causes of action to enforce them.

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