Shareholder oppression occurs when majority shareholders use their control to deny minority shareholders their right to participate and enjoy financial returns from a corporation. This generally occurs in a small, closely held corporation.
Oppression comes in a variety of forms. Courts have found oppression when majority shareholders:
- Dilute the minority’s ownership interest;
- Withhold or conceal the corporation’s books and records;
- Disregard a shareholder’s reasonable expectations;
- Remove the minority owner from the board or other management position;
- Refuse to declare dividends when the corporation is profitable;
- Pay excessively high rents for properties leased from majority shareholders;
- Divert earnings to the majority shareholders via excessive compensation;
- Misappropriate corporate assets for personal use; and
- Terminate employment.
