As an experienced Media Business Lawyer, I get questions all the time from clients about minority partners in a business. If you are the minority partner, the first thing you need to know is that you are at a clear disadvantage with regard to your majority owner. He has control and control is key as they say. Once he has control, his control is only tempered or modified by what we call a duty of fiduciary duty and/or a duty of loyalty to you and to the company. In effect, he cannot do anything that harms your interest in the company or harms the company. That doesn’t necessarily mean that he cannot lower your salary, he cannot change your benefit package, he cannot do anything to you that on a daily basis may have impact on your life because he has control.
What are your options at that point in time? Your options at that point in time are to approach him and say to him, “Hey, I’d like to move out of here because I’m not sure I’m getting treated fairly.” Then you move to the negotiation stage where you try to get yourself a buyout. If you have the agreement, you can move forward with the withdrawal provisions of your agreement to establish a value for your exit from the company and/or you can proceed to litigation.
If you wish to stay in the company, it gets a little ugly, primarily because if somebody doesn’t want you there it’s best and least expensive option to work out an agreement. This decides how you’re going to proceed forward or to exit the company and get your value and move on to another one. The way you get your value is to get the appraisal, get the agreed upon amount from either the accountant or yourself, and get to the point where you can get the value and exit the company. If, however, you wish to fight him and you wish to move forward, then your remedies are limited pretty much to litigation.
Litigation can be resolved by either mediation, which is you enter into a third party coming into the formula and saying this is how we’re going to work out going forward. This means you can stay and hope he changes his ways as regards to how he’s treating you, or it could end up in establishing the value and moving on. If you get to that stage you could also end up in arbitration, which is the least expensive. If you’re into the litigation phase, your position is if he has treated you fairly, has he violated his duty of loyalty and/or fiduciary duty to me and to the company. That’s going to depend on what he’s done and the facts of your particular case.
If you have any questions about minority partners in business, please contact our Media Business Lawyers for a free case evaluation.
This educational blog was brought to you by experienced Business Lawyer Walter J. Timby. Our law firm proudly represents clients throughout Media, as well as Pennsylvania, the greater Philadelphia area, Delaware and New Jersey.