Majority shareholders often will not be so bold as to fire a fellow shareholder from his job during a business partner dispute, and they cannot simply take away a minority shareholder\u2019s stock interest.\u00a0 Instead, the Freeze-Out, or Squeeze-Out, can become the weapon of choice.<\/p>\n
A Freeze-Out can occur in many different forms.\u00a0 A minority shareholder who used to be involved in crucial decisions suddenly finds that his opinion is no longer sought after.\u00a0 Financial information that used to be routinely provided is withheld.\u00a0 The accountant no longer returns your call, obviously instructed not to speak with you.<\/p>\n
Everyone knows that closely-held businesses are almost always run informally, and written agreements are often sorely lacking.\u00a0 Many companies have long-standing informal, unwritten agreements, like the mid-sized company in which the shareholders historically agreed that they would all take the same pay raise.\u00a0 When the majority shareholders started to ignore this informal agreement, and decided that they alone deserved huge raises and bonuses, the minority shareholder felt frozen-out and could see the handwriting on the wall.<\/p>\n
One of the most prevalent methods of freezing someone out of a company is changing an employee-shareholder\u2019s job responsibilities.\u00a0 Rather than outright fire a shareholder from his job as head of sales, for example, the employee-shareholder now finds himself the office or plant manager, no longer eligible for the sales commissions on which he and his family depend.\u00a0 The common denominator among all these situations is a shareholder who can\u2019t shake the feeling that he is now on the outside of his own company, looking in.<\/p>\n