By definition, a minority shareholder lacks total control over the direction of a corporation. In this disadvantaged position, minority shareholders are exposed to certain risks. Unfortunately, in some cases, majority shareholders and corporate insiders improperly take advantage of vulnerable minority shareholders.
Illinois law offers minority shareholders some much needed legal protections. In this article, our top-rated Chicago shareholder rights attorneys provide an overview of some of the most important things that minority shareholders need to know about their legal rights.
Three Things to Know About Minority Shareholder Rights
1. Minority Shareholders Have Inspection Rights
Under Illinois law (805 ILCS 5/7.75), minority shareholders in closely held corporations have the same inspection rights as do other shareholders. These rights give minority shareholders the ability to access privileged information. This is important: inspection rights can offer protection against self-dealing by unscrupulous corporate insiders. Among other documents and records, minority shareholders in Illinois may be able to access and review the books, records of accounts, and corporate minutes.
2. Shareholder Oppression: Remedies are Available
Illinois law (805 ILCS 5/12.56(12)) provides certain remedies to minority shareholders whose legal rights have been violated by the majority shareholders or by the officers of a corporation. This violation of rights is often referred to as ‘shareholder oppression’. Shareholder oppression happens when minority shareholder(s) are unfairly prejudiced by the actions of the majority. This could involve anything from fraud to self-dealing.
When shareholder oppression occurs, affected minority shareholders can take legal action to protect their rights. Several remedies are available, including setting aside the improper corporate actions, the removal of certain officers or directors, the payment of overdue dividends, the award of financial damages, and an order of a fair buyout for the minority shareholder. When no other remedy is sufficient, an oppressed minority shareholder may even have the ability to force the dissolution of the corporation.
3. Minority Shareholders Must Be Ready to Take Action
Minority shareholders — particularly those in a closely-held corporation — are in an especially vulnerable position. For this reason, minority shareholders always need to be ready to take action to protect their legal rights and financial interests. Quick action is a must. The longer a violation lingers, the more difficult it will be for a minority shareholder to protect themselves. If you are a minority shareholder in Illinois, and you believe that you have been a victim of shareholder oppression or if you believe that your shareholder rights have been violated in any other way, it is imperative that you consult with an experienced business lawyer immediately.
Get Help from Our Chicago Shareholder Rights Lawyers Today
At North Suburban Legal Services LLC, our Chicago business lawyers have the skills and experience needed to protect the rights of minority shareholders. To find out more about what we can do for you, please do not hesitate to contact our legal team at (312) 313-4038. Initial consultations are fully confidential and free of charge. With an office in Chicago, we represent minority shareholders throughout Illinois.