February 05, 2014 Articles

The Tyranny of the Minority

The case for reining in minority shareholder oppression litigation.

by Daniel D. Quick and Erin M. Pawlowski

Twenty-five years after the Michigan legislature revised and relocated the minority shareholder oppression statute, Mich. Comp. Laws § 450.1489 (section 489) within the Michigan Business Corporations Act (MBCA) and added a universal demand rule for all shareholder derivative actions, Mich. Comp. Laws § 450.1493a, Michigan courts and lawyers continue to struggle with the ramifications of these changes. The result has been a small library of literature, a multitude of court opinions (not all reconcilable), as well as three revisions to the oppression statute itself.

What has begun to crystallize is the vitality of the minority shareholder oppression claim. Nationwide, courts and legislatures have attempted to balance shareholder and corporate rights by upholding the line between direct and derivative shareholder actions, and when Michigan revised its oppression statute in 1989, it simultaneously adopted substantial changes to the provisions governing derivative litigation. What has transpired, however, is not balance but rather the dominance of the oppression cause of action. 

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