Starting a Business

What are my rights as the minority shareholder who is being laid off by majority shareholder?

min read
Opinions expressed by Entrepreneur contributors are their own.
The rights of a minority shareholder depend on a number of considerations:

1. The terms of your shareholder’s agreement
2. Your state’s law
3. whether the minority shareholder is being bought out of his ownership interest or merely terminated as an employee.

Often, employment and ownership are linked--for example, if your employment is terminated, you are deemed to offer your shares to the company for sale.

If that's the case, you have a strong argument for not having to continue to advance funds to a company that you no longer have an interest in. Yet another factor will be the terms of the credit line agreement: whether the guaranty is contingent on you remaining an owner of the company or not.

But it's best to review your shareholders' agreement (assuming you have one) with a local attorney. Minority shareholders do have rights concerning fair treatment and you may have negotiating leverage to get yourself off the credit line if it turns out the majority shareholder hasn't done right by you, which could be a violation of your state's corporate laws.

More from Entrepreneur

Are paying too much for business insurance? Do you have critical gaps in your coverage? Trust Entrepreneur to help you find out.
Get Your Quote Now

One-on-one online sessions with our experts can help you start a business, grow your business, build your brand, fundraise and more.
Book Your Session

In as little as seven months, the Entrepreneur Authors program will turn your ideas and expertise into a professionally presented book.
Apply Now

Latest on Entrepreneur

My Queue

There are no Videos in your queue.

Click on the Add to next to any video to save to your queue.

There are no Articles in your queue.

Click on the Add to next to any article to save to your queue.

There are no Podcasts in your queue.

Click on the Add to next to any podcast episode to save to your queue.

You're not following any authors.

Click the Follow button on any author page to keep up with the latest content from your favorite authors.