As a minority shareholder in a family business how/can I prove that I’m being unfairly treated?

My siblings voted 3 family members to the board and recently awarded themselves bonuses much higher than industry standard, including a 40k bonus to my sister who is the office manager in a 8 person office. We received a dividend of $4,900 each for the same time period. Do I have a case to sue based on shareholder oppression or anything else. If they are not going to pay a fair dividend I would like to force them to buy me out at fair value.

Asked on September 6, 2011 under Business Law, Georgia

Answers:

FreeAdvice Contributing Attorney / FreeAdvice Contributing Attorney

Answered 9 years ago | Contributor

Being involved is a family business has its benefits and detriments. What you have written about is the detriment of such. In order to determine if the voted bonuses were improper, you need to carefully read the company's bylaws assuming it is a corporation since you have written that there are shareholders to see if the award of such was allowable.

The other issue is were all shareholders given notice of the awards? If they were and you were the only one dissatisfied with what happened did you voice your objections in any written document?

For the family business to award such bonuses it must be profitable. If it is not profitable, then those bonuses should not have been awarded as a matter of good business sense.

If you want to be bought out of the corporation, you need to read the corporation's bylaws in that most likely they will set forth the mechanism for your shares being bought out.

As to the $40,000 bonus to your sister who manages an eight person office, how profitable was that office in relationship to the entire operation? Perhaps your sister and her team earned every penny of that bonus through extra effort, long hours, hard work and huge profitability and the $40,000 bonus was awarded to her in recognition of her efforts and as an incentive to keep doing a good job?

 


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