Minority Investor Rights in Private Companies: Buy-Sell Agreements, Court-Ordered Buyouts, Breach of Fiduciary Duty
Course Details
- smart_display Format
On-Demand
- signal_cellular_alt Difficulty Level
- work Practice Area
Corporate Law
- event Date
Thursday, January 20, 2022
- schedule Time
1:00 p.m. ET./10:00 a.m. PT
- timer Program Length
90 minutes
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This 90-minute webinar is eligible in most states for 1.5 CLE credits.
This CLE webinar will discuss the rights of minority investors in private companies who seek to secure a buyout of their ownership stake. The panel will examine what minority investors should demand in a buy-sell before investing and what claims by minority owners against majority owners for misconduct are most successful. The panel will discuss best practices for minority investors in documenting their rights and obligations when forming private companies.
Mr. Sluka represents a broad range of individuals and entities in all phases of complex commercial litigation, corporate governance disputes, securities matters, and regulatory investigations. He has successfully represented prominent businesses and individuals from all industries in cases involving directors’ fiduciary duties, valuation of level 3 assets, material misrepresentations, and shareholders’ rights. Mr. Sluka regularly practices in New York State and federal courts.
Mr. Mahler’s litigation practice concentrates on corporate dissolution proceedings, contested stock valuations, derivative actions and other disputes among co-owners of closely held business entities, including limited liability companies, partnerships and business corporations. He is a recognized authority and frequent lecturer on “business divorce,” about which he has written hundreds of articles on his widely followed blog, New York Business Divorce. He provides pre-litigation counseling to business owners involved in emerging disputes with business partners and, when litigation results, he represents clients through all phases of trial, appellate, mediation and arbitration proceedings.
Mr. Johnson is widely recognized as one of the go-to fiduciary litigators in Texas. His practice focuses on trust, estate, and closely-held business disputes. A frequent writer and speaker, David is known around the state as a thought leader in the fiduciary area. Mr. Johnson’s experience in trust and estate disputes includes will contests, elder abuse, mental competency, undue influence, trust modification/reformation/clarification, breach of fiduciary duty and related claims. Additionally, he has a transactional practice for trust departments in providing legal opinions on the construction of trust documents, documenting release and consent agreements, resignations, successor appointments, modification of trusts, trust mergers, trust severances, etc.
As a general rule, unless the written agreements state otherwise, a minority owner has only three basic rights in a closely held company: (1) the right to vote for the board of directors (in the case of a corporation) or the manager (in the case of an LLC); (2) the right to review the books and records of the company upon request; and (3) the right to receive dividends or profit distributions from the company if they are declared.
When minority owners have claims for misconduct by majority owners, these claims most commonly include (1) breach of contract, (2) fraud, and (3) breach of fiduciary duty. Typically, these common law causes of action do not permit the trial court to award the minority owner with the remedy of a buyout of their minority interest. While some states have enacted statutes that permit an oppressed minority owner to seek equitable remedies, including a buyout at fair value, the remedy for these claims is typically the recovery of actual damages.
The best advice for minority investors is simply this: before investing in a private business, minority owners should try to negotiate for rights including a buy-sell agreement with a put option. A buy-sell contract often provides investors with the right to obtain a buyout of their minority ownership interest in the company at a future time, under certain circumstances, and often at a predetermined valuation.
Listen as our expert panel discusses minority owner rights in private companies, what to include in a buy-sell agreement before investing, and best practices when considering a claim against majority ownership.
- Private company regulation
- Rights of minority owners
- Limitations on claims by minority owners
- Buy-sell agreements
- Best practices
The panel will discuss these and other key issues:
- What rights do minority investors have in private companies?
- When should a minority owner consider a claim against majority owners?
- Can minority investors force a buyout?
- What should be included in a buy-sell before investing by minority investors in private companies?
