Can you remove a shareholder

Are you dealing with partnership dispute? If you do engage in oppression of a minority shareholder, that shareholder can pursue equitable remedies. Generally speaking, only certain actions will quality as minority shareholder oppression. You should avoid:. The general rule is that the corporation must be operated for the financial benefit of all shareholders, not for that of the majority only.

While you can technically force a shareholder out, negotiation prevents the opportunity for legal issues down the road. While it is common to discount sales of minority shares, presenting a reasonable offer may encourage the shareholder to accept. Minority shareholder oppression examples include the following:. Pursuing any of these courses of action could result in legal action by the shareholder for this conduct. While this conduct is generally permissible, consult with a business attorney to prevent any opportunity for future legal disputes down the road.

Even if the shareholder fails to violate terms of the shareholder agreement, removal may still be possible. For example, your shareholder agreement may provide for a buyout clause.

A buyout clause allows for purchase of a minority share for an agreed-upon price. A buyout clause prevents minority shareholders who cannot be voted out from refusing to surrender their shares.

When determining whether a majority or minority shareholder can be removed, consult with the qualified business attorneys at BrewerLong to guide you in the right direction. Despite the removal of a shareholder, ensure your company continues operations smoothly and without interruption. BrewerLong attorneys work to limit any opportunities for future legal disputes with removed shareholders. With over a decade of experience, the attorneys at BrewerLong work to create excellent experiences through helping, listening, and collaborating with all clients.

Contact us today to discuss whether a shareholder can be removed from your company. In this case, the shareholder would be losing their percentage of the share capital and so their presence in the company would become less and less. So, the scenario would be moving towards the disappearance of the shareholder or to the point where their shares have been diluted. Notwithstanding the above, the capital increase is not exempt from possible challenges by the minority shareholders.

Consequently, the minority shareholders could argue that the capital increase agreement is unjustified and arbitrary. They would argue that the purpose of the capital increase is to dilute their shares. Or, they would bring up arguments such as the Abuse of Majority Rights and lack of information or even argue above the damage caused to the social interest of the company.

With that said, this type of abusive capital increase agreement could constitute a crime Article. With regard to the process of capital increase, it must follow the provisions of Article LSC.

Therefore, there must be an agreement from the General Board of Shareholders and a vote shall be required with at least two thirds in favour of the corresponding shares into which the share capital is divided. However, reinforced majorities could be established in the Articles of Association. In any event, the shares of the shareholder, who may be removed from the company, must be deducted from the calculation. In conclusion, there are many legal, statutory, and other alternatives mechanisms that will allow the removal of an unwanted shareholder.

With respect to the alternative mechanisms, particularly two of the approaches are considered the most effective for the removal of minority members: the approach of capital increase and the reduction of capital through the amortisation of shares. In other words, when the shareholder does not comply with the additional obligations to give something, to do or not to do something… that they had agreed on with the company. For example, the shareholder establishing another company with the same aims and objectives.

This is one of the cases referred to in Article. In these cases, a final judicial decision will additionally be required. Article LSC provides as follows: Consequently, the company may remove a shareholder for failing to comply with the duties and obligations laid out in the statutes.

Just as an example, some of these duties and obligations may be the following: Fulfilling the agreed accessory services. It should be remembered that the shareholder may have agreed with the company the fulfilment of certain additional obligations.

For example, appearing as a guarantor on a loan granted by the company. Effectively making the financial contributions, corresponding to their shares in the company. Other legal Ways: We have seen the possibility of removing a shareholder on the basis of legal and statutory reasons.