Texas Business Organizations Code Section 11.314 provides:
Shareholder Oppression is as likely and frequent in limited liability companies as it is in closely-held corporations. Surprisingly, LLC members may have remedies under Texas law that shareholders of corporations do not. Eric Fryar recently published a law review article in the Houston Business and Tax Law Journal that explores LLC member oppression and its unusual remedies under Texas law. Download your copy of the article here.
While shareholder agreements—in particular, Buy-Sell provisions—may provide some protection for minority shareholders against shareholder oppression, ordinarily they are not. More often, the Buy-Sell provision becomes the means of oppression. Normally, the buy-sell provides the option to purchase a shareholder’s shares upon termination of at-will employment at at book value or some other low price. In such a situation, the majority may file a minority shareholder for no reason other than to use the Buy-Sell to obtain the minority’s shares at an unfairly low price. The minority shareholder would be stuck with the (in retrospect) very unfair bargain set forth in the buy-sell. In this situation would the minority shareholder have any remedy? Perhaps.
Eric Fryar will speak at the 11th Annual Texas Bar CLE Essentials of Business Law Course at 9:30 am on March 13, 2020 in Houston, Texas. The topic will be Shareholder Agreements.
"A director has no direct relationship with the shareholders as his relationship is with the company. In the words of Eric Fryar, a Texas lawyer whose expertise lies in shareholder rights: 'If a director owed a fiduciary duty to shareholders, this would frequently place him in a position where his duty to shareholders would be in conflict with his duty to the company.'” The Business Mirror July 15, 2019.
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“[P]eople enter closely-held businesses in the same manner as they enter marriage: optimistically and ill-prepared.” Sooner or later, there is trouble in paradise. Resentments, jealousies, and disagreements always surface. In a corporation, someone always has control. Someone always winds up with the short end of the stick. What is minority shareholder oppression in Texas closely-held corporations? How do we fight it?
Michigan has a robust statutory remedy for shareholder oppression.
GGerald Mantese, Douglas Toering, and Fatima Mansour have just publised a fascinating new article in the January 2017 issue of the Michigan Bar Journal analyzing recent Michigan appellate decisions applying and fleshing out that remedy.
The Shareholder Oppression Blog provides timely updates and commentary on the development of Texas Shareholder Oppression law in the wake of the Texas Supreme Court's Ritchie v. Rupe decision, together with legal analysis of the rights, duties, and legal remedies in disputes among business owners in all types of closely-held businesses.
Visit Shareholder Oppression complete legal resource
Eric Fryar is a Houston, Texas business litigation attorney, whose practice focuses almost exclusively on shareholder oppression and similar disputes among business owners. Recognized as an authority in this area of the law, Eric Fryar has written, taught, and practiced the law the governing shareholder and business owner rights for more than a quarter century. He achieved the largest fraud verdict in the state of Texas for a group of minority shareholders in 2015--one of the largest verdicts in the country that year, and has recently published a law review article in the Texas Journal of Business Law on the future of shareholder oppression litigation in Texas.