Can a Shareholder Refuse to Sell their Share? | Nearest Lawyer (2024)

Generally, a shareholder can refuse to sell their shares, per the terms of the agreement. If there is no agreement or the agreement doesn’t have a buyout clause, then the shareholder may be forced to sell their shares. If part of the agreement requires a shareholder to sell their shares, then the majority shareholder can force the minority shareholder to sell their shares. In the case of disputes, it is important to involve an experienced shareholder dispute attorney for legal counsel, negotiation, and a possible favorable buyout outcome.

What Rights Does a Minority Shareholder Have?

Some guidelines protect minority shareholders’ rights. Below are the rights that minority shareholders have.

Right to Management Compliance

Minority shareholders have the right to expect directors and organization officers to act in the company’s best interest and comply with the set standards stipulated in the shareholders’ agreement. Directors and majority shareholders must avoid self-dealing and comply with the law and the organizations governing documents. Minority shareholders have the right to prevent directors from getting involved in business transactions that are a conflict of interest.

Right to Access Corporate Records

Minority shareholders can access company financial records and statements. They can request to view the company documents by writing to the appropriate parties. The requested records must include details of all minutes held by the shareholders, financial records, accounting details, employee expenses, director meetings, and any other information related to secondary offerings of the organization’s stock.

Right to Exercise Control

Minority shareholders can delay or cancel any acquisitions of other organizations if they vote and form a majority voting interest. In most states, the votes should be at least 50.1 percent of the outstanding shares to make the majority vote. However, this varies from state to state. Minority shareholders also have the right to determine and elect the company’s directors.

Right to Benefit from Holdings

Minority shareholders’ rights to benefit from company operations are limited. This may include the right to receive dividends or sell the company’s stock for a profit. The company directors and officers can resist these rights. The company management often wants to retain earnings and exploit investment opportunities to generate higher returns.

Sometimes, the majority shareholders and directors violate the minority shareholders’ rights. They can breach the judiciary duty that denies the minority shareholders to enjoy their rights. In this case, the minority shareholders should explore legal options.

An experienced lawyer can help you file a lawsuit and take action against the majority shareholders. In the case of fraud and poor management or abuse from the majority shareholder, the minority shareholders can file a lawsuit with a lawyer’s help to voluntarily dissolve the company and divide the assets and profits.

What Is a Forced Buyout?

A forced buyout is when a majority shareholder forces the minority shareholder to sell their shares. The majority shareholders try to gain ownership of the organization through various ways that aren’t stipulated in the shareholder agreement. Usually, this hostile process can create conflicts between the minority and majority shareholders.

If a forced buyout occurs against the shareholder’s terms and agreements, it is important to seek legal counsel immediately. This could directly help or hinder the majority shareholder from a forced buyout.

Can a Majority Shareholder Force a Buyout?

The majority shareholders can force a buyout depending on the shareholder’s agreement and the applicable law. If the contract allows a forced buyout, the majority shareholder can go for it. It is advisable to carefully review contracts, laws, and facts per the shareholder’s agreement and state laws to determine whether a majority shareholder can force a buyout. Most importantly, you should seek legal counsel from an experienced contract lawyer or business litigation attorney to help you with tailored solutions that can help minimize liability and maximize benefits.