Shareholder Disputes/Business Divorces: what about compensation?

Some say that it is useless to be a minority shareholder in a close corporation. Why? Because the majority shareholder or shareholders can set compensation, among other things. So if the corporation makes a million dollars, the majority shareholders might bonus it all out to themselves and leave the minority shareholder with nothing, or only a small and inadequate salary. If the minority shareholder complains about it, he or she gets voted down by the majority. In many jurisdictions, however, a minority shareholder does not lack a remedy. He or she can sue for “oppression” or under related theories such as breach of the obligation of good faith or breach of fiduciary duty. The shareholder can seek to prove that the salaries or bonuses of the majority shareholder exceed the standard compensation for those performing similar functions in other relevant businesses (industry studies of compensation are invaluable for this). The excess should have been distributed fairly among the shareholders by percentage and not hogged by the majority shareholder. Yes, special circumstances might justify extra payment for the majority shareholders, but the starting point is to see whether their compensation is excessive. 

For more info about your rights as minority shareholder, get in touch with Thomas Patterson at

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