Shareholder Oppression in Pennsylvania
Emergency injunctive relief and Pennsylvania’s default business law are two important shareholder concepts and tools for an oppressed shareholder that has been frozen out of a business.
When a shareholder, member, or partner has a shareholder dispute, they may not know what do or where to turn. When one partner is trying to freeze another partner out of a business, things move quickly and often unlawfully. The shareholder that started the dispute may be freezing you out of company accounts, not paying you what you are owed, or simply cutting off communications from colleagues.
Emergency injunctive relief and the application of Pennsylvania’s default business laws (or statutes) to a shareholder, member, or partner dispute are ways that an oppressed shareholder can use Pennsylvania’s corporate laws in his or her favor. When you feel lost and oppressed, you should know your rights and what options you have.
We have also discussed in our coverage of shareholder oppression an introduction, defining the reasonable expectations shareholders may have, and what it means to frustrate someone’s reasonable expectations.
Availability of Emergency Injunctive Relief
One of the first things you can do to put time (and the law) back on your side is ask the court for emergency injunctive relief. According to Anna Majestro’s article on americanbar.org, “Injunctive relief can be issued by a court before the case is decided on the merits in the form of a temporary restraining order (TRO) or preliminary injunction (PI)”. You can click here to read the full article.
Injunctive relief is a good way to have a court rule on the limited issue of the conduct of a shareholder in freezing you out of the company and frustrating your reasonable expectations. Being frozen out of a company can very quickly limit an individual’s access to their income and company documents. Without access to these things it can be very hard to go against the shareholder that is freezing them out. By having a court order an emergency injunctive relief, the shareholder will be able to maintain status quo or be restored to the position they were in before the oppression. Injunctive relief is an example of an equitable remedy, to learn more about the differences between legal remedies and equitable remedies, read our blog that breaks it down!
Maintaining status quo will prevent shareholders from profiting on your supposed disadvantage because people will often agree to terms that are less than fair just to put an end to the dispute. With the relief granted, the individual being frozen out will be more likely to have access to information, decision making, and get out of the company at a fair market value–rather than having to accept a low-ball offer.
Pennsylvania’s Default Business Law – The BCL
If you went into a business with no written agreement with your partners, in Pennsylvania, your “agreement” defaults to the Business Corporation Law (BCL). The BCL is the bare minimum that Pennsylvania automatically includes as your standard agreement. This helps keep businesses and partners honest in Pennsylvania. Even though there is no agreement, The BCL may provide a way out of a complex business dispute and ways to pursue or remove a partner that is acting improperly.
The BCL provides standards for a member, shareholder, or partner’s conduct in the company also known as their fiduciary duties. It explains how a company may be valued in certain situations. Pennsylvania’s BCL also provides for methods of removing a member from a company for improper or unlawful conduct.
Next Steps in a Shareholder Oppression Situation
If you are unfamiliar with business law, the applicability of a specific part of your agreement to your situation, or would like some assistance in a business dispute, our lawyers are here to help. We are here for both sides of the dispute. You can be the:
- Shareholder that is in charge of the business and think that another shareholder needs to be excluded for their unlawful or improper conduct.
- Shareholder that does NOT have active control of the business that is now being excluded for what seems to be no reason.
To clarify, shareholders cannot be frozen out for what is considered to be “no reason”. On the flip side, some situations do warrant freezing someone out of the business.
Situations that may warrant removing a shareholder would be coming to work incapacitated, fighting with colleagues, or using the company credit card for unapproved personal purchases. However, when you start removing a shareholder, you should have a plan. We focus our practice on shareholder disputes and business litigation and are here to help.
Contact Us at Kaminsky Law to Discuss your Shareholder Dispute!
For a free consultation please call us at 215-876-0800 or fill out a contact form!
Follow our social media accounts to stay up to date on other content that we will be putting out.
