What Are My Rights as a Minority Shareholder?
Understanding Shareholder Relationships in Closely Held Corporations
In small, closely held companies, especially start ups, you may be both a shareholder and an employee of the company. Though your employment status is "at will" under Massachusetts law, your fellow shareholders also owe you a fiduciary duty.
If you are terminated from your employment without a legitimate reason, you may have a claim for breach of fiduciary duty, or a "freeze-out." The basic idea is that if your employment is part of the benefit you received as a shareholder, and if your partners force you out without a good business reason, they may have breached their fiduciary duty to you.
How strong your claim is will depend on the facts- it will also depend on the written agreements between you and your partners. Under Massachusetts law, if you agree in writing to certain things, such as a right by the majority to terminate your employment, a court may not find that such a termination was a breach of fiduciary duty. However, these cases are very fact-specific.
If you believe you are being unfairly pushed out of a closely held company where you also have an ownership interest, it is important to consult an employment lawyer as soon as possible to get clarity on your rights.
Learn more here about shareholder freeze-outs in Massachusetts.
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