Minnesota Shareholder Rights
Two business entities typically have minority shareholders: a corporation or a limited liability company (LLC). In any situation where majority shareholders and a minority shareholder disagree, the majority is likely to win. Both groups have rights, even though the majority may win out in a dispute. However, Minnesota statutes set forth specific provisions regarding shareholder rights.
Shareholder Right to Inspect Documents.
In privately held corporations, shareholders have the right to inspect and copy certain corporate documents, including:
- Articles of Incorporation and Bylaws
- Shareholder Meeting and Board Meeting records
- The corporation’s share register
- Business addresses of current directors and officers
- Certain financial statements and reports
- Certain other corporate agreements and contracts.
Shareholders who want wish to take advantage of this right must make the demand in writing. The reason for the request must be related to their interests as a shareholder. No fishing expeditions!
Corporations can fight back against this type of demand by obtaining a protective order. But shareholders may force a corporation to allow the inspection by asking for a writ of mandamus. Of course, all this back and forth can be frustrating and expensive for everyone.
Shareholder Right to Dissolve the Corporation.
In some instances, Minnesota law permits shareholders to dissolve a corporation if “directors or those in control of the corporation have acted in a manner unfairly prejudicial toward one or more shareholders in their capacities as shareholders or directors.”
Shareholders Suing on Behalf of a Corporation.
If a corporation has been harmed, shareholders of closely-held corporations may file a lawsuit if corporate management failed to do so. The shareholder or shareholders filing the lawsuit, called a derivative action, must:
- Represent the interests of other shareholders;
- Have been a shareholder at the time the company was harmed; and
- State in the complaint specifically what effort were taken to get the corporation to act and why the corporation rebuffed those efforts.
This is by no means a complete list of shareholders rights. Additional rights may be discussed in a future blog.
Law Are Complicated.
Whether you’re a shareholder or you manage a corporation with shareholders, it’s critical to know what rights shareholders do and do not have.