5 Examples of Minority Shareholder Oppression in Michigan

November 30, 2020 Author: Brian Levin
UBS Finance Losees

Conduct That Leads to Liability for Violating the Rights of Minority Shareholders

In Michigan, shareholders may bring a cause of action for shareholder oppression by establishing that “the acts of the directors or those in control of the corporation are illegal, fraudulent, or willfully unfair and oppressive to the corporation or to the shareholder.”

Minority shareholder oppression can be any conduct that substantially interferes with the rights of a shareholder.

Levin Law, P.A. is committed to helping minority shareholders in Michigan who have been victimized by those with a controlling interest in a corporation, partnership, or limited liability company. Managing partner Brian Levin has recovered millions on behalf of minority shareholders. Contact Levin Law today at (248) 270-7338 or at contact@levinlawpa.com to discuss your legal options.

Below are five examples of minority shareholder oppression in Michigan:

  1. Termination of Employment or Limitations of Employment Benefits

Michigan’s shareholder oppression statute, MCL 450.1489, states that willfully unfair or oppressive conduct may include the “termination of employment or limitations of employment benefits” or any act that substantially interferes with the interests of the shareholder as a shareholder.

2.    Refusing to Pay Dividends

A corporation’s refusal to pay dividends to minority shareholders absent a legitimate business purpose may be grounds to bring a claim for shareholder oppression.

The Michigan Court of Appeals affirmed a lower court’s decision in Schimke v. Liquid Dustlayer, Inc. that a defendant’s refusal to pay dividends to minority shareholders despite substantial cash reserves was evidence that the defendant’s engaged in “willfully unfair and oppressive conduct.”

3.    Preventing a Minority Shareholder From Exercising Shareholder Rights

Shareholders are guaranteed certain statutory rights under Michigan’s Business Corporation Act or through a shareholders agreement. When a party with a controlling interest in a corporation prevents a minority shareholder from exercising their rights, it may constitute shareholder oppression.

Typical shareholder rights include: 

  • The right to vote and elect directors
  • The right to examine financial records
  • The right to receive dividends
  • The right to participate in shareholder meetings

4.    Reducing the Value of a Shareholders Interest

When a majority shareholder or party in control of the corporation engages in conduct that diminishes the value of a shareholder’s interest, it may be construed as shareholder oppression.

The Michigan Court of Appeals affirmed a lower court decision in McDonnell v. Colburn, that actions such as the “cancellation of advertising, appropriation of a corporate opportunity, withholding of billings and removal of marketing materials” constituted oppressive and willfully unfair conduct.

5.    Self-Dealing and Breach of Fiduciary Duty

When directors, officers, or those in control of a corporation act in a manner that benefits themselves at the expense of minority shareholders, they may be found in violation of Michigan’s shareholder oppression statute.

Contact Levin Law to Speak to a Shareholder Rights Attorney

Section 450.1489 of the Michigan Compiled Laws (MCL) enables shareholders to bring a claim for equity or monetary damages. As a minority shareholder, you have rights and may need legal representation to protect your interests.

If you suspect that your shareholder rights have been violated, contact Levin Law, P.A. at (248) 270-7338 or at contact@levinlawpa.com to discuss your options. Attorney Brian Levin is an experienced litigator that can help you understand your rights and the available remedies under Michigan law. Call today for a free, no-obligation consultation.