Minnesota Law Review

A Simple Statutory Solution to Minority Oppression in the Closely Held Business

Disputes involving closely held businesses come in primarily two varieties. When, as is often the case, the business fails, creditors regularly seek to pierce the corporate veil in an attempt to reach the assets of the business owners. When the business succeeds, on the other hand, those in control often are accused of keeping a disproportionate slice of the profit pie and of squeezing or freezing out minority owners. These latter disputes are often discussed under the rubric of minority shareholder oppression, and attempts to deal with them by either statute or judicial decision are as old as corporate law. Moreover, these disputes are not unique to businesses in the United States but are part of the global fabric of business organization law.

Virtually every state recognizes that minority shareholders in closely held corporations are much more vulnerable than their larger entity counterparts. Unfortunately, each state differs in its approach, a surprising state of affairs for such an important area of corporate law. This diversity is magnified by the growth of the limited liability company—that is, the “oppression” problem involves all closely held businesses, not just corporations. Any solution should be applicable across all business entities.

The authors argue for a statutory solution to minority oppression by proposing a model statute that creates a buyout right for both the shareholder and the company. Unlike traditional remedies, the proposed buyout right does not depend on a showing of wrongdoing. Consequently, the statute provides liquidity to the minority shareholder without the wasteful and acrimonious litigation presently attendant to the resolution of such disputes.

The authors also perform an independent and exhaustive analysis of minority oppression statutes and related case law to determine the underlying circumstances and the nature of relief. The results of the authors’ fifty-state analysis are summarized in an Appendix. For each state, the authors report the type of statute, the standard of liability, whether a buyout is permitted, and the context of the buyout remedy.

:: View PDF

De Novo

  • Case Comment: Bhogaita v. Altamonte

    EVERY DOG CAN HAVE HIS DAY IN COURT: THE USE OF ANIMALS AS DEMONSTRATIVE EXHIBITS Kyle R. Kroll, Volume 100, Online Managing Editor In Bhogaita v. Altamonte, the Eleventh Circuit recently decided whether to allow a dog in the courtroom as a demonstrative exhibit.[1] Although the case presented many serious [...]

  • Revisiting Water Bankruptcy

    REVISITING WATER BANKRUPTCY IN CALIFORNIA’S FOURTH YEAR OF DROUGHT Olivia Moe, Volume 100, Managing Editor This spring, as “extreme” to “exceptional” drought stretched across most of California—indicating that a four-year streak of drought was not about to resolve itself[1]—Governor Jerry Brown issued an unprecedented order to reduce potable urban water [...]

  • Defying Auer Deference

    DEFYING AUER DEFERENCE: SKIDMORE AS A SOLUTION TO CONSERVATIVE CONCERNS IN PEREZ v. MORTGAGE BANKERS ASSOCIATION Nicholas R. Bednar, Volume 100, Lead Articles Editor* On March 9, 2015, the Supreme Court of the United States handed down its decision in Perez v. Mortgage Bankers Association.[1]F The Court overturned the D.C. [...]