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Question added to topic Legal Basics For StartupsAugust 12, 2011

What Are My Rights as an Investor?

My partner and I started a restaurant two years ago. He put in the majority of the money, but I invested about 20 percent and have been running the restaurant by myself. Due to certain differences, he asked me to stop going to the restaurant and I'm not allowed access to any accounts. What are my rights as a minor but active stakeholer in the company? What should I do?
You're right. Just because you are a minority shareholder doesn't mean you don't have rights to have a say in what goes on in the company.

First, look carefully at your shareholders agreement -- assuming you have one. It should have provisions that talk about the voting rights that apply to significant business decisions such as staffing changes, determining signatories to the company's bank accounts and other management issues.

As a majority shareholder, your partner may well have the right, and enough votes, to make these changes, but not without following the proper procedures in your shareholders agreement and the state's corporate law.

However, if you don't have a written agreement, you'll want to give careful thought to whether you want to stay involved in this business. Litigation is your next likely step, and the cost of that could outweigh the value of your ownership interest. You'd be well served to speak to a local business attorney to get guidance on the cost of litigation and possibly negotiating a buyout of your interest.

Related: What to Do When Your Partnership Sours
Related: Shareholder Resolution - Voluntarily Liquidate [Form]

Nina L. Kaufman, Esq. is an award-winning New York City attorney, edutainer and author. Under her Ask The Business Lawyer brand, she reaches thousands of entrepreneurs and small business owners with her legal services, professional speaking, information products, and LexAppeal weekly ezine. She also writes the Making It Legal blog.

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