Disputes among partners or shareholders of small or “closely held” corporations or LLCs are often emotional and involve very personal issues. When the organizational agreements do not provide adequate guidance, evaluating the rights of the respective parties can become extremely factually and legally complicated.
Issues Involving “Control”
Often times, members of an organization find that they are not satisfied with the decision making process.
Voting rights are often the subject of contention, particularly in companies with few owners/managers/shareholders.
When the controlling group abuses its majority power unfairly to the detriment of a powerless minority, the law offers some protection. In addition to the “fiduciary duties” described below, various statutes and judicial decisions add protections for minority interests, particularly in smaller “closely held” companies.
Issues Involving Breach of “Fiducary Duties”
Partners, joint venturers, LLC members, corporate officers and directors, and shareholders of closely held corporations owe one another heightened level of obligation to others in the organization known as “fiduciary duties.”
DUTY OF CARE & DILIGENCE: The fiduciary duty of care requires that the person who owes the duty perform his or her role with competence and the care that would reasonably be required by one in that person’s position.
DUTY OF LOYALTY: The fiduciary duty of loyalty requires that the person refrain from acting in self interest and make decisions that are in the best interests of those to whom he/she owes the duty. The fiduciary cannot take an opportunity for his/her own benefit, cannot engage in self-dealing, and cannot conceal material information,
Dissolution & Accounting
When disputes among partners/shareholders/members cannot be resolved, the results can be fatal to the organization