Minority shareholders in closely held corporations often feel trapped when there is conflict with the other shareholders. Frequently the minority shareholder is unaware of the legal remedies available to them. Specifically, ORS 60.951 et seq., the “Oregon Business Corporation Act”, which applies to corporations whose shares aren’t traded publicly or nationally, grants a court extensive power to impose legal and equitable remedies on the corporation and its shareholders including:
- Ordering an accounting;
- Altering or compelling corporate action including reversal of shareholder or director action;
- Removal and appointment of directors or officers;
- Appointment of a custodian to manage corporate affairs;
- Compelling distributions;
- Awarding damages to an aggrieved party;
- Compelling the purchase and sale of a shareholder’s shares at “fair value” instead of “fair market value” and the terms of any such sale; and,
- Dissolution of the corporation.
While the shareholders and corporation may validly exclude certain remedies available under the statute, they can’t validly exclude a court’s exercise of its power to order an accounting, to award damages, or to compel dissolution of the corporation.
A shareholder can invoke these remedies in a case: (1) of director deadlock which the shareholders can’t break that causes irreparable injury to the corporation or to its shareholders generally; (2) where the directors or those in control of the corporation have, are or will act in an illegal, oppressive or fraudulent manner; (3) corporate assets are being misapplied or wasted; or, (4) the shareholders have been unable after two consecutive annual meetings to elect directors who will succeed directors whose terms have expired.