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Richard
Richard, Attorney
Category: Business Law
Satisfied Customers: 55287
Experience:  32 years of experience practicing law and a businessman.
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What type of rights do Minority shareholder s (18%) have.

Customer Question

What type of rights do Minority shareholder s (18%) have. My husband owns 82% of shares in an incorporation in Suffolk County , NY and was told by other shareholder, he is going to be sued for incompetently running the business. The business is in distress with no profits ,does that shareholder (who has had no connection in running the business)?
Submitted: 7 years ago.
Category: Business Law
Expert:  Richard replied 7 years ago.
Hi there Caroline...Being a minority shareholder does not give someone much power...about the only thing they can allege is that someone has breached their "fiduciary" duty to the shareholders.   You cannot ever prevent someone from suing another person, but as long as your husband has used used the business judgment of a prudent business man and no availed for himself corporate opportunites, he should prevail in any lawsuit. Your husband as a super majority shareholder might want to consider a reverse stock split to the extent the minority shareholder only has a fraction of a share and then cash him out.   In any case, I think your husband will be fine.

I hope this has given you the guidance you were seeking. I wish you the best of luck!

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The information given here is not legal advice. As all states have different intricacies in their laws, the information given is general only. This communication does not establish an attorney-client relationship with you. I hope this answer has been helpful to you.
Customer: replied 7 years ago.
Hi tkx for answer

What are some fiduciary duties?

Are there any specific ny state rights for minority shareholders?

Can you please explain the following . I am sorry but I do not understand "husband has used used the business judgment of a prudent business man and no availed for himself corporate opportunies " Tkx very much
Customer: replied 7 years ago.
please ans my last ?
Customer: replied 7 years ago.
I am prepared to pay someone who can give me answers to my ?'s ...please help , these are matters that we are loosing sleep over. Thank you
Expert:  Richard replied 7 years ago.
I am out to dinner. I will answer as soon as I get home. Sorry for the delay!
Expert:  Richard replied 7 years ago.
<p>Ok....I'm back....Sorry about that!</p><p> </p><p>Your husband as the operating officer of the corporation is required to satisfy the prudent business man standard....that standard is the requirement that he make decisions on behalf of the corporation in the manner of a prudent man, that is, with intelligence and discretion. The prudent man rule requires care in the making of decisions when viewed at the time the decision was made, not in 20/20 hindsight. </p><p> </p><p>Your husband as a director and officer owes a fiduciary duty to the company and shareholders in the sense that he cannot direct opportunities that available for the benefit of the company to himself.   The minority shareholder pretty much only has legal remedies in the event the controlling owners are acting in self-interest. The Model Business Corporation Act (MBCA) provides relief to minority owners when the directors or "those in control" act in manner that is fraudulent, oppressive, or when their conduct is illegal. </p><p> </p><p>New York state does not have any particular rules for minority shareholders that are dissimilar to those available to minority shareholders, in general...which are discussed above.   </p><p> </p><p> </p><p><em>I hope this has given you the guidance you were seeking. I wish you the best of luck!</em></p><p> </p><p><em> If I have adequately answered your question, even though the answer might not have been the one for which you hoped, I would appreciate it if you would <u>please click the GREEN ACCEPT button </u></em><em><u>NOW</u></em><em>, so that I receive credit for my work; otherwise, though you have made a deposit, I do not receive credit.</em></p><p> </p><p><em> If you need additional clarification on this question after clicking ACCEPT, please do not hesitate to click Reply and I will be happy to do what I can to help you further. Thanks for allowing me to be of service to you. </em></p><p> </p><p><em>The information given here is not legal advice. As all states have different intricacies in their laws, the information given is general only. This communication does not establish an attorney-client relationship with you. I hope this answer has been helpful to you.</em></p>