A common theme among minority shareholders seeking legal representation is termination of employment.\u00a0 Readers of this blog may be aware that termination can often constitute minority shareholder oppression, warranting a remedy such as a court-ordered buyout.\u00a0 But, unfortunately, not all terminations are equal, as not all terminations constitute oppression.<\/p>\n
The key to whether termination of employment amounts to minority shareholder oppression is what the court calls the \u201creasonable expectations\u201d of the employee\/shareholder.\u00a0 While I have explained this in a prior article, questions raised in recent cases make me believe that this issue should be addressed one more time.<\/p>\n
In one case, a man married into a business when he wed the daughter of the majority shareholder.\u00a0 Not only did he gain a wife, but he received a job and a 20% ownership in the company.\u00a0 When he and the majority owner\u2019s daughter got divorced, though, he was unceremoniously (but not really unexpectedly) fired.\u00a0 An argument could be made that he had a reasonable expectation of having a job as long as he was a shareholder, since he was clearly a valuable member of the company.\u00a0 However, there is also a strong argument that he could not reasonably expect to continue working at the company if he divorced the child of his new business partner.\u00a0 And when a court delves into not merely what the shareholder actually believed, but what he should have believed (the \u201creasonableness\u201d of that belief), it is easy to see that we have left the realm of the law, and are now into psychology and human emotions.<\/p>\n
Not wanting to leave his fate up to a judge who intended to tell him whether his life plan upon marrying his wife was \u201creasonable,\u201d this case settled.\u00a0 But the buyout was probably not as large as it would have been had he, the minority shareholder, \u00a0been one of the founders.\u00a0 In such a case, he would have owned the same twenty percent stake.\u00a0 In both cases, the 20% interest would have had the same value.\u00a0 However, it would have been easier to argue that a co-founding shareholder had a reasonable expectation of continued employment than one who married into ownership.\u00a0 And, of course, a stronger liability argument usually results in a better settlement, since you are negotiating from a position of strength.<\/p>\n
In my next article, I will address some measures that may be taken to avoid having a court determine whether your expectations of continued employment were \u201creasonable.\u201d<\/p>\n","protected":false},"excerpt":{"rendered":"
A common theme among minority shareholders seeking legal representation is termination of employment.\u00a0 Readers of this blog may be aware that termination can often constitute minority shareholder oppression, warranting a remedy such as a court-ordered buyout.\u00a0 But, unfortunately, not all terminations are equal, as not all terminations constitute oppression. The key to whether termination of […]<\/p>\n","protected":false},"author":17,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[2],"tags":[93,20,45,22,89],"coauthors":[],"acf":[],"yoast_head":"\n