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Abusing Buy-Sell Provisions

Eric Fryar

Abusive Use of Buy-Sell Agreements

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.

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Topics: Shareholder Oppression

Shareholder Agreements for Dealing With Shareholder Oppression

Eric Fryar

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.

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Topics: Shareholder Oppression

What Is Shareholder Oppression in Texas?

Eric Fryar

“[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?

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Topics: Shareholder Oppression

New article on Michigan Shareholder Oppression

Eric Fryar

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.

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Topics: Shareholder Oppression

Texas Shareholder Oppression in the Legislature

Eric Fryar

Will the Texas Legislature Restore the Shareholder Oppression Claim?

The Texas Supreme Court's Ritchie v. Rupe decision overturned the Texas shareholder oppression doctrine. The implications for Texas law are significant. One commentator has written: "The problem is not simply that Ritchie is bad law. Ritchie is also bad policy—indeed, it may have disastrous economic effects. Although the full impact of the opinion has yet to be seen, this Essay contends that Ritchie is likely to disincentivize investment in close corporations, ramp up the frequency of shareholder oppression, and imperil the financial health of many small businesses."

Politically conservative justices on the Texas Supreme Court and lower appellate courts tend to think in terms of plaintiff vs. defendant--with the politically conservative preference being a pro-defendant, anti-plaintiff outcome. However, that narrow mindset does not always advance justice or a true conservative agenda. Refusing to protect the investments of small business owners is not really pro-business. Therefore, policy thinkers on both the left and the right of the political spectrum have been troubled by the elimination of judicial protection of small business investors, and efforts have been made in the Texas legislature to address the havoc caused by the Ritchie decision.

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Topics: Shareholder Oppression
Fryar Law Firm Knows Shareholder Oppression-Knowledge Makes the Difference

About this blog

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

Fryar Law Firm | Shareholder Oppression Attorneys

About the Author

Eric Fryar

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.

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