For our introduction to shareholder oppression and other shareholder disputes, we deal with one of the questions our Philadelphia business law clients ask about most: the oppression of one shareholder by another shareholder. When we say “Shareholder Oppression” we include member oppression and partner oppression and use the term “shareholder” synonymously with “member” and “partner”. In order to better understand the concept, this article serves as an introduction to Pennsylvania shareholder oppression, with a focus on Philadelphia, Bucks County, and Montgomery County but we will have a series of posts to dive into the other concepts as well.
Can a 50% Shareholder be oppressed?
When multiple people form a company in a Pennsylvania, either with other shareholders, members, or partners, there are many options on how to split the shares or interests. 50/50 splits are typical and if there is no agreement in writing, the assumption is that the shares or interests are split evenly between parties. As a result, the first question for a Philadelphia shareholder dispute lawyer is, “Can a 50/50 shareholder be oppressed?”, and in Pennsylvania the law says YES.
What the Pennsylvania Shareholder Dispute Law says:
The term “minority” in the context of Pennsylvania shareholder litigation does not mean a person who owns or controls less than 50% of the corporate stock and has been held to include 50% shareholders. See Leech v. Leech, 2000 PA Super 334, 762 A.2d 718 (2000) (finding that oppressive conduct can occur in close corporations where the shareholders each own 50%); see also Baron v. Pritzker, 52 Pa. D. & C.4th 14 (Com. Pl. 2001) (imposing fiduciary duties on a 50% shareholder of a close corporation).
Minority shareholders often to not know what to do when their rights are being oppressed. It is important to overcome the lack of information to avoid falling victim to being oppressed by a majority shareholder.
Useful links – Legal Ease
The purpose of these videos and blog posts is to provide legal resources for Philadelphia small business owners. Our Legal Ease playlist on YouTube was created specifically to turn legalese terms, which always feel complex, into easier to understand ideas by breaking down the terms and providing examples.
The topics of our post come from our Pennsylvania small business lawyer experience and actual shareholder disputes that we litigated and helped resolve. Linked below is some of the other Kaminsky Law content.
- Contract Basics: What are Material Terms
- Mediation, Arbitration, and Litigation: What you should know
- Types of Business Entities in Pennsylvania
If your Shareholder Rights have been oppressed, Call a lawyer!
If you are located in the Philadelphia area and you believe that your rights have been oppressed it is important to move quickly. To learn more read about our Philadelphia Business Litigation or Bucks County Shareholder Dispute practice areas. The next step is to contact a lawyer that handles shareholder disputes in the Philadelphia area.
If you are a shareholder or member of a Pennsylvania small business, your shareholder rights may have been oppressed if the other shareholders or partners have:
- froze you out of the company;
- cut off access to your income or fired you without a good reason;
- shut you out of the company’s accounts;
- refuse to provide information about the company’s operations; and/or
- blocked your access to employees, customers, or other shareholders.
There are times where these things may be warranted, however, they occur in unwarranted circumstances as well. We will speak more about that in our next section on reasonable expectations. In the meantime, if you feel that your rights as a shareholder have been oppressed and would like someone to advocate for you, call 215-876-0800 or fill out a contact form.