Legal Navigation Through Shareholder Disputes

Conflicts arise even in high-performing companies. When a shareholder dispute occurs, it can significantly impact the day-to-day operations of an organization. We understand the complexities of shareholder negotiations and the necessity of a swift resolution.

For knowledgeable legal counsel, turn to the lawyers at Palmer Lehman Sandberg, PLLC. Located in Dallas, our firm represents businesses in a range of shareholder dispute scenarios. We represent both majority and minority shareholders.

Disputes Emerge For Varied Reasons

Shareholder disputes can range from financial matters to business operational concerns. Those in the minority may feel that their voices are not being heard. They feel left out of the loop. Specific disputes can take many forms and include:

• Financial issues involving dividends and returns on investments
• Fraud and deceptive practices
• Breach of fiduciary duty
• Intellectual property and trade secrets
• Shareholder oppression

Resolving Disagreements Through Negotiation Or Litigation

Alternatives to business litigation have increased in their effectiveness and sheer numbers. Trials are costly, in terms of both shareholder relationships and money that comes from a business’s bottom line. Alternative dispute resolution that involves arbitration, mediation and trials using private judges has helped parties come together and find faster and more cost-effective resolutions.

Even with multiple ADR options, we recognize the value of a trial in state or federal court. When the opposing side is refusing to give any ground, we will use our proven skills to litigate shareholder disputes.

Frequently Asked Questions About Shareholder Disputes

Below are common questions we encounter during our consultation sessions regarding shareholder disputes.

Can I inspect a corporation’s books and records if I suspect mismanagement in Texas?

Texas Business Organizations Code grants shareholders limited rights to inspect certain corporate books and records. This right is not automatic. It must be exercised properly and for a valid purpose tied to ownership interests.

Common reasons inspection requests arise include:

• Concerns about improper use of company funds
• Unexplained declines in company performance
• Lack of transparency from directors or officers
• Suspected self-dealing or favoritism

This right serves as a fundamental tool for detecting financial irregularities or management problems. However, corporations often resist these requests. At our firm, inspection rights are approached carefully, with attention to timing, scope and documentation, so disputes do not spiral into avoidable litigation.

In Texas, what constitutes a “breach of fiduciary duty” in a closely held corporation?

In a closely held corporation, conduct that may lead to a breach claim includes:

• Use of corporate assets or opportunities for personal gain: This includes diverting business opportunities that belong to the corporation. It also covers using company resources for personal projects without proper authorization.
• Engaging in self-dealing transactions without proper disclosure: Directors must fully disclose their interests when approving contracts that benefit themselves. Independent shareholder approval is often required to avoid liability.
• Making decisions that benefit themselves at shareholders’ expense: Excessive compensation or favorable loan terms to insiders demonstrate clear conflicts. These actions harm other shareholders while the company struggles financially.
• Withholding material information affecting shareholder decisions: Failing to disclose financial problems or pending lawsuits prevents informed choices. Shareholders cannot make proper decisions about their investments without complete information.

Involving our legal team early helps identify whether conduct crosses the line and what remedies may be available.

How can a shareholder be removed?

Removal procedures depend on the corporate structure and governing documents. Common methods include:

• Involuntary buyouts under shareholder agreements: Buy-sell agreements establish procedures and valuation methods for removing shareholders. Disputes often arise over fair pricing and proper triggering events.
• Judicial dissolution proceedings: Courts can order dissolution when management engages in illegal or oppressive conduct. This remedy serves as a last resort when other solutions fail.
• Forced sales through oppression claims: Minority shareholders can petition courts to compel share purchases at fair value. This protects those facing squeeze-out tactics from majority owners.

Our lawyers effectively handle all documentation, negotiations and court proceedings required to protect your financial interests.

Learn More About Options For Resolving Shareholder Disputes

Call our Dallas office at 214-242-6444 or contact us online to arrange a consult with an attorney.

We offer convenient office hours, flexible appointment times and reasonable fees. Visa, Mastercard and Discover are accepted.