Shareholders often play a key role in large, successful businesses. They provide financial support during the startup stage or during periods of expansion or financial hardship. Companies that take on shareholders by selling stocks grant those investors or equity owners certain rights and protections.
Unfortunately, those who have sizable ownership interests or leadership roles within an organization do not always respect shareholders the way that they should. In some cases, a coalition of shareholders or leadership within the organization may engage in inappropriate conduct that technically constitutes shareholder oppression. Such behavior may be actionable in many cases.
What circumstances may constitute inappropriate shareholder oppression?
Denying shareholders meeting access or voting rights
Shareholder meetings are important for both organizational transparency and the ability of shareholders to shape the future of the company. When a group of shareholders or executives within the company tries to exclude certain minority shareholders from meetings or crucial votes, that can constitute shareholder oppression.
Holding closed-door meetings, providing inaccurate information about the setting of setting of an upcoming shareholder meeting or removing shareholders from the premises when they arrive to participate can all be forms of oppression that prevent shareholders from using their rights as interested parties.
Refusing to pay appropriate dividends
One of the most manipulative strategies companies may use to freeze out shareholders in an oppressive manner is to deny them their right to appropriate dividends. When the company is profitable, shareholders should receive a portion of the proceeds.
Intentional manipulation of financial records and refusing to issue dividend payments can be a tactic intended to push out shareholders. Such efforts can deprive them of what they deserve as equity holders in the organization.
Forcing the sale of shares
Sometimes, majority shareholders or attorneys representing other interested parties try to manipulate, trick or coerce shareholders into selling their shares. Denying them a vote and dividend payments are often part of that process.
Shareholders typically have the right to continue maintaining their shares until they decide that they want to liquidate their holdings and reinvest elsewhere. Attempts to compel minority shareholders to liquidate their shares are often thinly-veiled attempts to oppress them and force them out of the organization.
Initiating a shareholder oppression lawsuit is a reasonable reaction to unethical and potentially illegal behavior. Frustrated shareholders may need help evaluating their options and deciding how to take action when facing oppression from those who have also invested in or who help to run a company.