On the level of the individual, a fairly effective way to sum up US law would be “majority rule with protections in place for minority interests.”  Thus we have the Bill of Rights, the Civil Rights Act, etc. The world of corporate law looks a little different.  There majority rules and protections for minority interests are minimal.

By far the most commonly used and arguably one of the most powerful avenues of defense for the minority interest in a shareholder dispute or any other kind of squeeze play lies in the concept of fiduciary duty.  Fiduciary means having an obligation to act in someone else’s best interest.  It’s a word with numerous legal applications but in the context of a shareholder dispute, it generally refers to the responsibility of a corporate board to act in the best interests of the corporation and of the shareholders.  This would also apply in partnerships.

A squeeze out is a somewhat informal term for what happens when a person or persons which together have a majority interest in a business try to convince or coerce a minority interest to sell their control.  There are numerous means by which the majority party can try to accomplish this, everything from intentionally devaluing shares to denying dividends to rescheduling shareholder meetings with minimal notice.  In most cases, recourses for the oppressed minority are few.

But the concept of fiduciary duty can prove an effective defense.  There’s no clear cut line here, no sharp divider between legal and illegal.  Every case will be different.  But in general principle, if an oppressed minority can show that the majority’s actions are not in the best interests of the company as a whole, it is possible to resist the squeeze play.

Again, every case is unique and as such it’s not only difficult but quite unhelpful to get too much into broad, general statements.  The best avenue for any party in a squeeze out, shareholder dispute, or partnership freeze out scenario is to seek professional counsel.

For more information on shareholder disputes, fiduciary duty, minority oppression, or other corporate law concerns, contact the Chicago corporate lawyers at Horowitz & Weinstein.

Disclaimer.

When business owners separate, when shareholders “divorce,” the term squeeze out is sometimes applied to the dispute.  Specifically, a squeeze out occurs when majority shareholders try to get at the shares of the minority.  There are numerous complexities and facets to minority oppression and shareholder disputes.

We have represented businesses and individuals on both sides of squeeze play in a variety of situations.  Our chief civil litigator is former New York Assistant District Attorney Samuel “Sam” Neschis.

Please contact us for more information.

Legal Disclaimer.

One of the central principles in corporate law is that of majority rule.  Unlike in Congress, in corporate law the rights of the minority are not so fiercely protected.  A minority shareholder looking to resist a squeeze out or other forms of minority oppression often tries to prove that he has been dealt with unfairly.  The case usually tries to rest on solid evidence based on the fair value on the shareholder’s shares.  This of course raises the issue of just how one goes about determining fair value.

The first important point to make is this: the terms “Fair value” and “Fair market value” are not the same.  Fair market value is the price shares would have if bought and sold on the open market, without either party be pressured into the transaction, and with all involved having all the relevant facts.  Fair market value is used when evaluating shares as part of gift tax or estate tax proceedings.  Far value on the other hand is applied when shares are purchased by other shareholders of the same entity.  The two concepts, although similarly worded, are very different and they apply to separate situations.

In 2007, amendments to the Illinois Business Corporations Act defined fair value as “the proportionate interest of the shareholder in the corporation, without any discount for minority status or, absent any extraordinary circumstances, lack of marketability.”  Such discounts are applicable when determining fair market value and prior to the 2007 amendments they were frequently used in fair value proceedings between majority and minority shareholders.  Minority stakes were considered less valuable since they did not confer voting and other powers and their value could also be decreased given a poor market for them.

A fair value dispute arises whenever the controlling shareholders benefit or would benefit at the expense of the minority.  Illinois law requires that minority shareholders be given the fair value for their shares.

For more information on fair value proceedings, shareholder squeeze outs, minority oppression or other corporate law concerns, please contact the Chicago corporate attorneys at Horowitz & Weinstein.

Legal Disclaimer.

Many new businesses begin with a simple structure.  This has the advantages of minimizing legal complications and interference.  As a business grows, however, those benefits may be outweighed by the advantages of a different business structure.  Sole proprietorships may evolve into limited liability companies or S corporations.  S corporations or LLCs may evolve into C corporation.  All of these can lead to unforeseen legal or tax complications and difficulties.

We have assisted business owners with entity conversions and other growing pains of their businesses.

Please contact us for more information.

Legal Disclaimer.

One of the central principles in corporate law is that of majority rule.  Unlike in Congress, in corporate law the rights of the minority are not so fiercely protected.  A minority shareholder looking to resist a squeeze out or other forms of minority oppression often tries to prove that he has been dealt with unfairly.  The case usually tries to rest on solid evidence based on the fair value on the shareholder’s shares.  This of course raises the issue of just how one goes about determining fair value.

The first important point to make is this: the terms “Fair value” and “Fair market value” are not the same.  Fair market value is the price shares would have if bought and sold on the open market, without either party be pressured into the transaction, and with all involved having all the relevant facts.  Fair market value is used when evaluating shares as part of gift tax or estate tax proceedings.  Far value on the other hand is applied when shares are purchased by other shareholders of the same entity.  The two concepts, although similarly worded, are very different and they apply to separate situations.

In 2007, amendments to the Illinois Business Corporations Act defined fair value as “the proportionate interest of the shareholder in the corporation, without any discount for minority status or, absent any extraordinary circumstances, lack of marketability.”  Such discounts are applicable when determining fair market value and prior to the 2007 amendments they were frequently used in fair value proceedings between majority and minority shareholders.  Minority stakes were considered less valuable since they did not confer voting and other powers and their value could also be decreased given a poor market for them.

A fair value dispute arises whenever the controlling shareholders benefit or would benefit at the expense of the minority.  Illinois law requires that minority shareholders be given the fair value for their shares.

For more information on fair value proceedings, shareholder squeeze outs, minority oppression or other corporate law concerns, please contact the Chicago corporate attorneys at Horowitz & Weinstein.

Legal Disclaimer.

It’s an unfortunate but true fact of corporate life that shareholders don’t always see eye to eye.    Disagreements can escalate to conflicts.  A common occurrence when shareholders fight is for the majority to try to coerce the minority, mainly to try to get them to sell or give up their shares.  There exist any number of reasons why a majority shareholder might seek to oust a minority–although greed or lust for power probably jump to mind, usually the motivations boil down to a business decision–but whatever the reason behind it, when the majority tries to force out a minority shareholder, it’s called a squeeze out.

While the Constitution makes provisions to preserve the rights of minority party’s against any possible tyranny of the majority, in the corporate world few such safeguards exist.  There are numerous strategies a majority shareholder can undertake to try to force a minority shareholder to sell.  In many cases the squeezed party has far fewer options.

The weapon of choice (legally speaking) for most targets of squeeze play looking not to go down without a fight lies in the idea of fiduciary duty.  Although there’s nothing in corporate law that requires minority shareholders be defended as such, all members of a corporate board have a fiduciary duty, that is they are required to act in the interests of the company at large.  The standard defense against squeeze play is thus to argue that the squeezer is acting not in the best interests of the company but for his or her own personal advantage, perhaps at the expense of the overall wellbeing of the company.

Every squeeze out situation is different and shareholder disputes are rarely simple.  For more information on shareholder disputes, minority oppression, squeeze play or other corporate law concerns, contact the Chicago corporate attorneys at Horowitz & Weinstein.

Legal Disclaimer.

On the level of the individual, a fairly effective way to sum up US law would be “majority rule with protections in place for minority interests.”  Thus we have the Bill of Rights, the Civil Rights Act, etc. The world of corporate law looks a little different.  There majority rules and protections for minority interests are minimal.

By far the most commonly used and arguably one of the most powerful avenues of defense for the minority interest in a shareholder dispute or any other kind of squeeze play lies in the concept of fiduciary duty.  Fiduciary means having an obligation to act in someone else’s best interest.  It’s a word with numerous legal applications but in the context of a shareholder dispute, it generally refers to the responsibility of a corporate board to act in the best interests of the corporation and of the shareholders.  This would also apply in partnerships.

A squeeze out is a somewhat informal term for what happens when a person or persons which together have a majority interest in a business try to convince or coerce a minority interest to sell their control.  There are numerous means by which the majority party can try to accomplish this, everything from intentionally devaluing shares to denying dividends to rescheduling shareholder meetings with minimal notice.  In most cases, recourses for the oppressed minority are few.

But the concept of fiduciary duty can prove an effective defense.  There’s no clear cut line here, no sharp divider between legal and illegal.  Every case will be different.  But in general principle, if an oppressed minority can show that the majority’s actions are not in the best interests of the company as a whole, it is possible to resist the squeeze play.

Again, every case is unique and as such it’s not only difficult but quite unhelpful to get too much into broad, general statements.  The best avenue for any party in a squeeze out, shareholder dispute, or partnership freeze out scenario is to seek professional counsel.

For more information on shareholder disputes, fiduciary duty, minority oppression, or other corporate law concerns, contact the Chicago corporate lawyers at Horowitz & Weinstein.

Disclaimer.

The Illinois Department of Labor (IDOL) ensures employer compliance with a host of Illinois and federal laws, including the 2003 Equal Pay Act, the Health and Safety Act, Minimum Wage Law, and the Freedom of Information Act.  IDOL regularly audits businesses to resolve overtime, time-and-a-half and wage disputes, as well as other compliance concerns.

IDOL has the legal authority under the Labor Arbitration Services Act to resolve disputes arising between employees and employers and to take punitive action against the involved parties.  Many IDOL investigations and audits begin in response to employee complaints.

For more information on IDOL audits and other compliance concerns, contact the Chicago corporate attorneys at Horowitz & Weinstein.

Legal Disclaimer.

When business owners separate, when shareholders “divorce,” the term squeeze out is sometimes applied to the dispute.  Specifically, a squeeze out occurs when majority shareholders try to get at the shares of the minority.  There are numerous complexities and facets to minority oppression and shareholder disputes.

We have represented businesses and individuals on both sides of squeeze play in a variety of situations.  Our chief civil litigator is former New York Assistant District Attorney Samuel “Sam” Neschis.

Please contact us for more information.

Legal Disclaimer.

Shareholder agreements go beyond the provisions contained in most corporate bylaws and minutes.  They are recommended for most small corporations to help provide structure in common issues such as salaries of shareholders who are also employees; expense reimbursements; providing a structure in the event a shareholder is no longer an employee; providing a structure in the event a shareholder wishes to exit the corporation; as well as other relationships between shareholders.

We have draft and review shareholder agreements.  When a shareholder dispute arises we look to shareholder agreements as one of the starting points to determine the rights of our client.

Please contact us for more information.

Legal Disclaimer.