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Getting Personal

Could you be liable for your corporation's bad decisions?

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This story appears in the March 1997 issue of Entrepreneur. Subscribe »

Suppose you own a small corporation where, at periodic board of directors' meetings, you and a few others make decisions about the company on behalf of all the shareholders. Now suppose some of the other shareholders don't like the way you're running the company. Can they sue for damages? Can you be held personally liable?

The answers are yes and maybe. "Lawsuits among shareholders are regular and common," says Robert B. Thompson, a professor at Washington University School of Law in St. Louis who specializes in corporate governance and shareholder disputes. Thompson notes that these lawsuits are even common in very small corporations, especially when the shareholders don't get along. Since the decision makers are typically majority shareholders who could benefit from self-dealing transactions, minority shareholders often protect their interests in the only way available: by going to court.

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