Your Rights as a California Shareholder
What are your rights as a California shareholder? What are the important clauses and issues you should be concerned about in your shareholders’ agreement?
A well-crafted shareholders agreement protects all of the owners and investors in any corporation. Shareholders have very specific rights under federal and California law. Shareholders rights have been well established over the past several years and California has worked to add additional protections for minority shareholders.
Some of the rights you should be aware of include, but are not limited to:
Minority shareholders should have pre-emptive rights which provides protections or an assured right to buy any new shares offered by the corporation. These pre-emptive rights help to protect the position of a minority shareholder.
Stock Valuation is one of the crucial elements of any shareholders’ agreement. There should be a specific process and/or algorithm for establishing the value of any shares of stock which might need to be sold, acquired or transferred within or outside of the company.
Shareholders with even a small minority interest are often provided the right to appoint or select directors or officers of the corporation. This ensures that the minority interests are protected and that minority shareholders have the access needed to keep abreast of their investment as well as the accounting associated with the corporation.
What does your shareholders’ agreement say regarding the review and approval of capital expenditures? How is the working capital of the corporation going to be protected? When is the company and it’s officers authorized to make a capital expenditure and is there a threshold for that type of transaction? It is important to make sure the shareholders’ agreement addresses a shareholders’ right to have the right to review and give input regarding any corporate expenditure, and at some level a specific approval.
There are very specific shareholders’ rights regarding the forced dissolution of a corporation, shareholder oppression and other behaviors which lead to disputes between shareholders as well as manipulation or deception associated with the interests of minority shareholders by majority stakeholders.
Shareholder disputes are one of the most common forms of business disputes and litigation. You’ll need an attorney who has a proven track record of successfully resolving shareholder disputes in a timely and cost-effective manner. Your attorney should have extensive experience in trial as this will provide genuine strength to your side of the equation during negotiations, mediation and arbitration.
Look for an experienced California shareholders’ rights and shareholder dispute attorney with decades of experience in these important documents and matters. You have taken the risk of investing in a business or corporation. It is important to carefully and consistently monitor and protect those interests and to have a reliable and proven attorney to turn to when things don’t go as planned.