Shareholder Disputes Attorneys in San Jose, California & Houston, Texas

The term shareholder is sometimes applied more broadly than its technical definition. A shareholder is someone who owns stock in a corporation and is thus part of the ownership group. In a corporate setting. Shareholders oversee the direction and operation of the business entity and can bring legal actions against the board of directors or officers for issues concerning the direction of the company, abuse of fiduciary duty, or malfeasance. 

In contrast, a limited liability company (LLC) can be owned by several persons who are known as members of the LLC. They are shareholders in a broad sense, but an LLC cannot even sell stock.  

A general partnership likewise does not sell shares per se but has partners, or co-owners, who finance the operation and are therefore liable for the company’s debts and lawsuits. While members of an LLC are mostly immune from personal liability, partners are personally responsible, which means their personal assets can be dunned or seized in the event of unpaid obligations or legal judgments. 

Whatever business structure your company has, disputes can and often will arise among the different owner classes. If you're a shareholder in Texas or California and feel that your rights have been infringed upon or you have issues with the direction of the company, contact our business attorneys at The Heritage Law Group.  

With more than three decades of experience resolving business disputes, we can help you resolve the situation and protect your rights. We proudly serve clients from our offices in San Jose, California, and Houston, Texas. 

Resolving Disputes in a Corporation 

If you own stock in a registered corporation, whether privately or publicly held, the corporation will have both articles of incorporation and bylaws that govern how the business is operated. A board of directors will be the governing body that appoints executives and officers of the company and is accountable to the shareholders. 

Disputes must therefore be taken to the board of directors. If the board refuses to act on something that shareholders deem to be misguided or outright wrong, the shareholders can file what is called a shareholder derivative lawsuit. A derivative lawsuit is filed in the name of one shareholder on behalf of all shareholders.  

If the lawsuit prevails, then the court will order the board and officers to correct the situation. If there is a monetary award, then it goes to the corporation to make amends for what was wrong, and the shareholders gain by way of improved share value. 

If an individual shareholder or minority group of shareholders are harmed because, for instance, their votes aren’t counted or their dividends are withheld, then individual lawsuits can be filed. In a successful individual lawsuit, the plaintiff or plaintiffs will be awarded directly through the restoration of rights or award of back-due dividends. 

Resolving Disputes in an LLC or General Partnership 

Like a corporation with its articles of incorporation, an LLC should also create and file a partnership agreement. The agreement should include provisions for dispute resolutions, and these provisions should cover: 

• How to deal with an objection by one or more members (owners of the LLC) over the management and direction of the entity 

• What to do if one member wishes to leave the business, or if one member suddenly passes away 

A general partnership, though not necessarily required legally when creating the business entity, should also create a partnership agreement. The major difference between an LLC and a general partnership, as noted earlier, is that members of an LLC are not usually personally liable for any debts or legal judgments against the business.  

In a partnership, the co-owners are personally liable, so the agreement must address issues should one co-owner run up debts for personal enrichment, as well as issues regarding the day-to-day management of the business.