In Pennsylvania, there are thousands of small businesses that are organized as corporations and owned by a small group of shareholders. They are referred to as closely held corporations. The person or persons who own 51% or more of the shares of the corporation will ordinarily have control over 100% of corporate decisions. Minority shareholders, therefore, are in a precarious position if the majority controlling shareholder chooses not to conduct business in a manner that is fair to all of the shareholders.
But the law imposes a fiduciary duty upon the majority controlling shareholders to avoid taking action to oppress a minority shareholder’s interests. Examples of conduct that may constitute shareholder oppression are:
- Paying excessive salaries or benefits to the majority shareholder or his family;
- Using corporate funds to purchase goods or services from a majority shareholder individually; and
- Terminating a minority shareholder’s employment.
If you are a minority shareholder and you do not feel that the majority is treating you fairly, you should get a legal consultation. There a legal remedies available to protect you.