If you own a share of a privately held business, your rights are largely determined by your operating and purchase agreements. Where an operating agreement does not address an owner’s rights, North Carolina Law often steps in to provide “default” provisions or rights. However, your rights as a shareholder vary based on the portion of the company that you own. This article will consider some of those statutory rights for “qualified minority” shareholders, meaning those who own between 5% and 50% of a company’s shares or have owned less than 5% for at least six months.
If you are a minority shareholder, you have the right to vote, dissent, and access key documents. These rights give you a say in the selection of corporate directors, the sale of assets outside normal operations, corporate mergers, and share exchanges. Second, you can “dissent” from the corporation in some instances, such as if you disagree with a merger or if the corporation shifts to foreign ownership and the revamped shares disfavor you relative to the old ones. In dissenting, you invoke your “appraisal” rights, which may give you the right to resell your shares to the corporation at fair value. In almost all cases, you are entitled to a list of shareholders ahead of meetings, meeting minutes, and important financial statements. Shareholders who are considered “qualified” under the law also have the ability to inspect privileged corporate documents—including accounting reports, records of director actions, and minutes from shareholder meetings.
If you are a shareholder in North Carolina, you may, under the right circumstances, even have the right to force a company to distribute its profits via a dividend. This right, like all others, is subject to numerous disqualifying circumstances and has many caveats, so it is important you speak with an attorney about your specific situation.
For more information about shareholder rights, contact Parton law.
Declan M. Hurley
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The law applies differently in each situation. Nothing on this page should be construed as or be relied upon as legal advice.