Business Torts in Closely Held Companies

Hopkins Centrich Law, Your Shareholder Oppression Law Firm

Hopkins Centrich Law provides cutting-edge, high-quality, creative legal solutions for minority shareholders in Texas Closely Held Corporations when their rights have been abused by the majority owners. Our attorneys and staff have decades of experience in virtually every aspect of business law in The Woodlands and Texas. We have designed and incorporated businesses, managed their every legal concern, engaged in litigation on their behalf, aided with mergers and acquisitions, managed mergers, acquisitions, and sales.

Hopkins Centrich Law knows Texas business law. We are uniquely positioned to help shareholders when they have ample cause to believe their rights are being violated. When we work with a client, our sole focus is on them. We take advantage of everything technology has to offer in order to optimize how we work. That gives us more time to spend with you, more time to understand the issues, and more time to negotiate and prepare for trial.

We get that no one wants to contact a law firm unless they feel they absolutely have to. When they do, it almost always means that ‘things have reached a head.’ The attorneys and staff of Hopkins Centrich Law understand what you are going through. We will make the process understandable; you will know what is happening with your case every step of the way, and you will never have to track us down for answers.

Types of Business Torts

It’s an unfortunate fact of business life that sometimes the majority owners of a closely held company do not act in the best interest of the company or shareholders. Sometimes this is manifested by a recognizable business tort, a wrong perpetrated by a majority owner that adversely impacts your ownership rights and equity.

These are some potential torts that can occur in a closely held company:

• Breach of fiduciary duty - Majority shareholders, directors, or officers can breach their fiduciary duties owed to the minority shareholders and the corporation. This includes self-dealing, usurping corporate opportunities, etc.
• Fraud - Majority shareholders or directors could commit fraud by making false representations about the company's finances, operations, etc. to benefit themselves over the minority.
• Conversion - Misappropriating corporate assets or diverting them for personal use by the majority owners.
• Self-dealing - Majority owners engage in unfair self-interested transactions with the company.
• Conflicts of interest - Directors or officers take actions or have interests that conflict with the company's interests.
• Misrepresentation - Majority shareholders or directors make false or misleading statements to induce the minority to act in reliance.
• Tortious interference - Intentionally damaging relations between the company and a third party like a supplier or customer.
• Defamation - Making false, damaging statements about the minority owners that harm their reputations.
• Infliction of emotional distress - Intentionally or recklessly taking actions that inflict mental anguish on the minority owners.
• Misappropriation of trade secrets - Disclosing or using the company's confidential information and trade secrets without authorization.
• Corporate waste - Majority shareholders diverting corporate assets for unnecessary, unreasonable or unprofitable purposes.

The minority shareholders could potentially sue for these torts and recover damages if they can prove the elements required for each claim. Consultation with a business attorney is advisable.

• Unjust enrichment - Majority shareholders could be unjustly enriched through excessive compensation, usurping business opportunities, etc.
• Accounting malpractice - Company accountants could negligently or intentionally provide inaccurate financial information.
• Legal malpractice - Attorneys retained by the majority owners could give negligent or fraudulent legal advice.
• Breach of contract - The majority owners could cause the company to breach contracts with the minority owners or third parties.
• Promissory estoppel - The minority relies on promises made by the majority, causing detriment.
• Negligent misrepresentation - The majority carelessly provides the minority with incorrect information influencing their decisions.
• Fraudulent concealment - The majority conceals essential information from the minority that should have been disclosed.
• False imprisonment - Restricting the physical movement of the minority owners against their will.
• Invasion of privacy - Violating the minority owners' privacy rights by intruding upon their solitude.
• Harassment - Severe, pervasive harassment creating a hostile environment for the minority owners.
• Civil conspiracy - Majority owners conspire together to injure the minority owners through unlawful, overt acts.
• Neglect of corporate formalities - Causing the company to disregard important corporate formalities and procedures.

What to Do If You Think Your Minority Rights are Being Violated

First, do not believe anything you read online, or listen to someone who tells you that the Texas Supreme Court did away with Shareholder Oppression lawsuits. The Court merely limited some of the basis for bringing a Shareholder Oppression action. There are still many avenues to relief available, particularly where the majority shareholders have made decisions that are not In the best interests of the business.

Don’t wait. If you think your shareholder rights have been trampled on don’t hesitate to call. Don’t hope that things change, don’t let a matter fester, don’t try to solve the problem yourself through emails and letters and not-so-calm conversations. Contact us. The earlier you do, the better, there are deadlines for every legal action. The longer you wait, the fewer your legal options.