Ohio shareholders have the right to examine and copy the articles of incorporation, regulations, books and records, minutes, records of shareholders and voting trust agreements. Ohio Rev. Code Ann. § 1701.37(C) (West 2010).
To exercise this right of inspection, the shareholder must make a written demand that states the “specific purpose” for the inspection. § 1701.37(C). The shareholder will not be allowed to inspect and copy records if the shareholder does not state the reason he wishes to exercise his privilege. Or the reason is “unreasonable or improper.” § 1701.37, comment 1.
Ohio does not provide for judicial dissolution for shareholders in cases of fraud or illegality. See § 1701.91.
Ohio case law states that in a close corporation, controlling shareholders have a fiduciary duty to prevent oppression of minority shareholders. Crosby v. Beam, 548 N.E.2d 217 (Oh. 1989); Frank Lerner & Assoc. Inc. v. Vassy, 599 N.E. 2d 734, 738 (Ohio App. 3d 1991). Shareholders in Ohio close corporations owe one another the same fiduciary duties imposed on partners. Estate of Schroer v. Stamco Supply, Inc., 482 N.E.2d 975, 981 (Ohio App.3d 1989). The shareholders must deal with each other in the “utmost good faith.” Id. They must not misuse their power by promoting their personal interests at the expense of corporate interests. Tinter v. Lucik, 876 N.E.2d 1026, 1031 (2007).
A shareholder may only bring a direct action when the shareholder is harmed in a “separate and distinct” way from the corporation. Boedeker v. Rogers, 746 N.E.2d 625, 629 (Oh. App. 8 Dist. 2000).
“Where majority or controlling shareholders in a close corporation breach their heightened fiduciary duty to minority shareholders by utilizing their majority control of the corporation to their own advantage, without providing minority shareholders with an equally opportunity to benefit, such breach, … is actionable. When such harm can be construed to be individual in nature, then a suit by a minority shareholder against the offending majority or controlling shareholders may proceed as a direct action.” Crosby v. Beam, 548 N.E.2d 217, 221 (Oh. 1989).
A derivative action is brought by the shareholder on behalf of the corporation to enforce a right belonging to the corporation. Oh. R. Civ. Proc. 23.1; Crosby, 548 N.E.2d at 219.
To have standing to file a derivative suit, the shareholder must be a “legal or equitable owner of shares” in the corporation. Oh. R. Civ. Proc. 23.1. The shareholder must also “fairly and adequately” represent the interests of the shareholders in enforcing the corporation’s rights.
The complaint must be verified and state the efforts made by the shareholder to obtain the desired action from the directors before filing suit.
Once a derivative suit has been commenced, it may not be dismissed or settled without prior court approval. Oh. R. Civ. Proc. 23.1.
We are licensed only in Texas
In order to remain on the cutting edge of business owner rights law, Fryar Law Firm keeps abreast of legal developments in all 50 states. This 50-state survey is presented for educational purposes. However, we do not hold ourselves out as experts on the law of any jurisdiction other than Texas, and we may not practice law in any other state, with the following exceptions:
The lawsuit involves a non-Texas company but may be brought in Texas courts--example, if the client is a Texan or the company operates in Texas.
We are part of a legal team that includes local counsel. Out of state legal teams benefit from our experience when we consult. We may also act as lead counsel, if we have local co-counsel and permission of the court.
We are offering general consultation and are performing our work in Texas. We often consult with out-of-state clients on litigation strategy or assist them in organizing for litigation or settlement or in putting together a legal team. We also assist out-of-state clients in exercising their rights to corporate information.
This post represents our opinion regarding the relevant shareholder oppression and minority ownership rights law. However, not everyone agrees with us, and the law is changing quickly in this area. This page may not be up to date. Be sure to consult with qualified counsel before relying on any information of this page. See Terms and Conditions.