There are numerous rights that shareholders have under Texas law. These rights are governed by whether the corporation at issue is a publicly traded or privately held corporation, the number of shareholders, and whether the shares are listed on a national securities exchange.
The Texas Business Corporation Act affords shareholders an opportunity to examine and copy the company’s books, accounts and minutes. If a shareholder has been treated wrongly by the corporation, a shareholder may bring a claim for oppression or file a derivative suit.
In Texas, a shareholder alleging oppression must prove the following to prevail:
- Conduct on the part of the majority shareholders that substantially defeats the minority shareholder’s expectations that, when viewed objectively, were reasonable under the circumstances and central to the minority shareholder’s decision to join the venture; or
- Wrongful, burdensome, or harsh conduct, a lack of probity and fair dealing in the company’s affairs to the prejudice of some members, or a visible departure from the standards of fair dealing and a violation of fair play upon which each shareholder is entitled to rely.
Redmon v. Griffith, 202 S.W.3d 255 (Tex.App. – Tyler 2006, no pet.).
In a shareholder derivative suit, the shareholder brings suit against the company’s executives or directors for their own benefit, for the benefit of other, similarly situated shareholders, or for the benefit of the company. Allegations in a shareholder derivative suit often include allegations of waste of corporate assets, self dealing, or wrongful re-acquisition of shares of stock.
Shareholder derivative suits are unique, in that they allow the shareholder to step into the shoes of management or the board and bring the action themselves if management or the board has failed to act.
Shareholder Dispute Damages
Damages available in a derivative suit could include::
- Actual damages
- Specific Performance
- Exemplary or punitive damages
- Attorney’s fees
- Costs of suit
In addition to shareholder derivative lawsuits, shareholders in privately held companies are sometimes treated unfairly, cut out of deals, or wronged by their partners. If you believe you have a potential shareholder derivative lawsuit or dispute, please contact the Houston and San Antonio Shareholder Dispute Lawyers at Hill Law Firm today.