What happens when one shareholder secretly competes with the corporation? When one shareholder excludes another from the benefits of the corporation? The Illinois Business Corporation Act (BCA) provides remedies for this misconduct. To name a few: removal from the corporation, appointing a receiver to manage it under the supervision of the court, dissolution of the corporation, money damages, or a forced buyout of one shareholder by another at the “fair” value (not necessarily the market value). In fact, the BCA also allows a shareholder to file a lawsuit if another officer or shareholder acts illegally, commits fraud, or wastes corporate assets.
The analysis of these business lawsuits begins with the corporate documents. These documents have to be analyzed in conjunction with the BCA and the law of fiduciary duties and good faith.
In public corporations, federal law provides relief in certain circumstances. It regulates how control over the corporation is exercised. Proxy fight regulations, analysis of tender offers, and disclosure obligations are all part of the analysis. Business litigation in these circumstances requires a review of the securities law as well as the corporate paperwork.
Often these business disputes—both those of close (small) and public corporations require emergency action. If the wrongdoer is not stopped, the harm will occur without possibility of monetary damages. A temporary restraining order or a preliminary injunction can help prevent irreparable harm in an emergency.
The risk of these disputes can be reduced by drafting appropriate corporate documents. Try to reach clear agreements in advance. While cut and paste documents are cheaper to prepare, they may be more costly in the long run. Especially when they fail to accurately reflect the objectives of the parties.
If you suspect that a fellow shareholder, officer, or director of a corporation is guilty of misconduct, you should consult a business litigation lawyer at once.
If you think we can help you on one or more of these matters get in touch with us. Call (312) 223-1699 or click here.