-
The firm handles disputes among corporate shareholders and partners, particularly regarding closely-held companies, including litigation for control.
The firm has handled disputes among evenly divided (50%-50% ownership) shareholders and among majority and minority shareholders, involving control, validity of corporate elections, proxies, voluntary and involuntary dissolutions, Corporations Code Section 2000 buyouts, claims of wrongdoing (including mismanagement, misappropriations, and fraud), derivative lawsuits, oppression of minority shareholders, receiverships, and appointments of provisional directors.
The firm handles partnership battles, including disputes as to whether a partnership actually existed, determining whether persons were general partners, attempted exclusions or expulsions of partners from the partnership business, wrongful dissolution or repudiation of the partnership, and issues as to rights of management and control.
Disputes among shareholders (particularly in closely-held corporations), and among partners in partnerships, occur frequently. Internal conflicts arise for a multitude of reasons.
Even companies owned equally by two 50% shareholder/partner groups or individuals usually have one group or individual with practical operating control (for example, the group/individual with a majority of directors if there is an uneven number of directors, or the group/individual with whom the corporate president is affiliated, if there is an even number of directors). When disputes arise, the group/individual with control can wield the power which derives from such control, and attempt to impose their will to resolve conflicts. Needless to say, the other group/individual is not likely to be pleased by their apparent lack of power notwithstanding their 50% ownership of the company.
When these conflict situations regarding control arise, various actions can be taken based upon the documents which the parties have previously agreed to regarding their intra-company relationships, which may include bylaws, shareholder or partnership agreements, voting agreements, and other types of agreements. Corporate or partnership law (both statutory and case law) of California and/or other applicable states also may guide what can or cannot be done. The existing company documents and applicable law may enable disputes to be resolved without going to court. However, there are many avenues which involve judicial proceedings, including special corporate lawsuits such as for appointment of a provisional director or for court-supervised dissolution, which may be utilized for relatively narrow and prompt disposition of these types of matters.
Not every company has 50%-50% ownership, and in many companies one side has undisputed control and another side is unquestionably minority ownership. Oppression of minority owners may arise in many contexts. Some are inherent with the minority status and cannot be remedied, but others can be addressed and corrected. Classic examples of oppression include distributing an excessive portion of company profits to majority owners as compensation of one type or another, terminating the employment of a minority owner or even locking such owner out of the business, or refusing to provide company financial information. The percentage of minority ownership can have significant effect; a 33 1/3% owner may have far greater rights and powers than a 3% owner. However, any owner has certain rights which can be legally pursued to try to improve the owner’s situation as to the company. Again, while applicable company documents, and corporate/partnership statutory and case law, may permit resolution of such matters without court proceedings, such proceedings are available if needed.
Other frequent areas of discord among shareholders or partners pertain to allegations of wrongdoing by those in control of the company. This can include misappropriations, improper payments, excessive compensation, transfers of company assets, transactions with related companies or persons, use of company funds for personal expenses, taking company business opportunities, use of trade secrets or intellectual property, illegal conduct on behalf of the company, breaching contracts, mismanagement, breach of fiduciary duty, and countless other types of improper activity. Sometimes such wrongdoing can also be committed by individuals who do not control the company. Damages and other types of relief are available remedies for such wrongdoing, and such wrongdoing can even be a basis for court-ordered change of company control.
Certain unique issues arise in the partnership context. Because a partnership can be formed under California law without being called a partnership or without the partners realizing that they are in a partnership, disputes frequently arise as to whether a partnership actually exists. If a partnership has liability to others, disputes may arise as to whether and when particular individuals were legally general partners of the partnership and therefore personally liable. Partners often attempt to expel or exclude other partners from the partnership business, and may then continue the partnership business without recognizing that if they do so, they may in essence be working for free for the benefit of the supposedly former partner.
Intra-corporate and partnership disputes are often like marital divorces. They can be extremely divisive and highly personalized. From the outset, the parties tend to know more about the secrets, questionable conduct, and pressure points of the opposing side than would be the situation in most business litigation versus third parties. And the stakes are very high because the financial livelihoods of the parties are often totally involved.
The Senkfor Law Office has handled, and achieved great results in, these types of matters for many years.
|