Legal Question in Business Law in Virginia

Rights of a 33% minority shareholder in S-corporation

I am having a dispute with one of my business partners. We are a closely held S corporation and all 3 of us are equal shareholders and officers (I'm president). I offered to buy them out, and they said no but countered with the same buyout offer. If we cannot come to an agreement ourselves, what are my rights as the minority shareholder? I want to hold onto the business but so do they, so what happens when you are at a standstill but can no longer work together? The third (neutral) partner will probably stay with whoever keeps the business and pretty much refuses to take sides. The attorney I consulted only offered the ''dissolve the corporation and split the assets'' suggestion, but we all want to keep the business, so hoping you can help me understand what my rights are and what would happen if we cannot agree among ourselves. This is a restaurant so we don't have assets (i.e., inventory), we have mostly debt and potential earnings. But it's a successful business and certainly worth fighting for. Thanks for any help you can give me!


Asked on 6/13/06, 7:47 pm

4 Answers from Attorneys
Scott Riddle Law Office of Scott B. Riddle, LLC

Re: Rights of a 33% minority shareholder in S-corporation

No one on a message board can second-guess a lawyer who has reviewed your case. Moreover, we do not have your Articles, By Laws and other documents to see how your corporation is governed and disputes are settled. You need to read those. Generally, unless otherwise stated, majority rules. You really need to get a lawyer in on this now, as you may very well show up and the locks are changed and you are out. That is often the way these disputes end up, and quite often, the documents back up the majority.

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Answered on 6/13/06, 8:00 pm
Glenn M. Lyon, Esq. MacGREGOR LYON, LLC, Business Attorneys

Re: Rights of a 33% minority shareholder in S-corporation

I agree with Mr. Riddle and would add that in only limited circumstances can you "veto" majority action as a minority shareholder. In other words, they have to be basically denying your rights under the company documents and agreements. If your previous attorney reviewed all relevant documents and advised you to dissolve/sell, than you should probably go that route.

If not, you would have to continue doing business with people with whom you are not getting along. Not a great situation, but keep in mind that the company documents dictate your duties with regard to the company and you need to fulfill your obligations even if you don�t like your partners.

If you would like to discuss any issues further, please feel free to contact my office. My contact information is below. Thank you.

The foregoing is general information only, not specific legal advice. No attorney/client relation has been created or should be implied.

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Answered on 6/13/06, 8:11 pm
Robert Strupp Robert J. Strupp,Attorney at Law, PLC

Re: Rights of a 33% minority shareholder in S-corporation

I agree with what has been said here. I suggest you consult with an attorney that you are comfortable with. I also agree that the corporate governing documents are very important. There may be relevant provisions about disputes, disolution, powers of the president, etc.

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Answered on 6/14/06, 9:21 am
Jon Gottlieb Flynn & Gottlieb, P.A.

Re: Rights of a 33% minority shareholder in S-corporation

The Corporation's documents will control. If they are silent, you are left with simply negotiating your way out of the dispute. Any other action you undertake will ultimately result in the dissolution of the Corporation.

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Answered on 6/14/06, 10:29 am


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