The law requires a company’s management and its majority owners to protect the rights of minority shareholders and to treat them fairly. Often, however, majority owners use their power to benefit themselves at the expense of minority shareholders. By doing this, majority owners violate their fiduciary duties.

Almost any activity whereby a majority shareholder receives an outsized benefit over a minority shareholder is suspect under the law. Virtually any corporate activity should give the minority shareholders the same benefits enjoyed by majority shareholders, in proportion to their ownership interest.

Courts recognize that with the unique power that majority shareholders exercise over companies, they stand in a unique position to take advantage of minority owners. The various forms of such abuse are too numerous to list. Examples include when majority owners:

• Loan money to company at an inflated interest rate;
• Enter contracts with other companies they own to receive products or services at above-market rates;
• Create separate classes of shares, one for the majority owners, another for minority owners;
• Take for themselves corporate opportunities that the company could exploit;
• Sell the company or any of its assets in a way that benefits the majority owners (or their family).
• Issue additional shares to themselves (or their family) thereby diluting the minority holders’ interest;
• Do anything where the minority shareholder is not treated equally.