What is a Shareholder Freeze-Out?
Shareholder Freeze-Outs: Understanding Your Rights and Remedies
If you are part owner in a closely held company- meaning a company that is not publicly traded-you and the other owners owe one another fiduciary duties. A fiduciary duty is the "duty of utmost good faith and honesty."
Your operating agreement or shareholder agreement likely specifies how, if at all, one owner can be required to give up their ownership. That agreement will define the scope of the fiduciary duty in that regard.
Where it gets complicated is if you are also an employee of the company and the other owners terminate your employment without a valid reason. In that situation, you might have a claim for a specific type of breach of fiduciary duty, known as a "freeze-out." If the other owners cannot prove a legitimate business reason to end your employment, you may be able to recover damages for the termination.
Learn more here about shareholder freeze-outs under Massachusetts law.
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