Close quarters create conflicts. Just ask anyone operating a closely held company. No matter how well individuals work together, personal interests often influence company decisions that not everyone agrees with. Unfortunately, such disagreements commonly lead to actions that, intentional or otherwise, amount to shareholder oppression. In many cases, however, these actions are preventable.
Last week we wrote about one specific kind of shareholder oppression known as a squeeze-out. With a squeeze-out, the majority effectively removes the minority's right to benefit as a shareholder, and more or less forces that shareholder to sell its interest at a reduced price back to the majority. Although similar, today we want to discuss a different form of oppression more common to the partnership context known as a "freeze-out."
As we've written before, minority shareholder oppression can take a number of different forms and vary in its severity. Some forms of oppression simply deprive minority shareholders of certain rights they should be entitled to. More complete forms of oppression, however, may effectively remove the minority shareholder from the company altogether.
No successful business embraces a 'less is more' philosophy. Unfortunately, the same often holds true for the distribution of power in majority and minority shareholder relationships. Though that doesn't always create friction, sometimes majority shareholders use that power as a way to treat minority members unfairly. Oregon law protects against such actions. Over the course of the next few weeks we'll attempt to illustrate how, highlighting the general principals of shareholder oppression law, as well as some of its case-specific nuances.