South Carolina courts have used the terms “freeze out” or “squeeze out” interchangeably. These terms mean “the use by some of the owners or participants in a business enterprise of strategic position, inside information, or powers of control or utilization of some legal device or technique, to eliminate from the enterprise one or more owners or participants.” Common freeze out techniques include termination of a minority shareholder’s employment, the refusal to declare dividends, the removal of the minority shareholder from a position of management, and the siphoning off of corporate earnings through high compensation. Often, these tactics are used in combination. Greenville shareholder oppression attorney Andy Arnold represents individuals who seek to protect their ownership interest in a company or those who have been unfairly accused of oppressive conduct.
Money and Power
Corporate squeeze outs generally occur in the small business setting and apply to corporations, statutory close corporations and limited liability companies. In a recent shareholder oppression case tried by Horton Law Firm attorneys, a co-founder and 45% owner of a local business was locked out of his office, refused reentry, accused of sharing trade secrets, and denied financial information while his business partners created a secret entity to funnel profitable business into their pockets. Accounting gimmicks were used to transfer assets and money to these insiders. Our client could not sit idly by and watch his business being taken from him, and after two years of litigation, our client prevailed after a four day trial.
Business partners have a fiduciary duty to their businesses and their partners. Business partners cannot engage in self-dealing or misappropriate business opportunities. A breach of fiduciary duty is a business tort and can be the basis of a claim for a business or partner who has been financially damaged by the breach. Fraud takes many forms, and sometimes it takes a lawyer with business litigation experience to know where to look. Electronic discovery can be critical in breach of fiduciary duty cases; in our most recent shareholder oppression case involving breach of fiduciary duty, the defendants’ computer hard drives were imaged and searched, which uncovered the planning of a conspiracy to force our client out of his business.
A freeze out can be devastating to a breadwinner and his/her family. There is no substitute for knowing the law. And experience counts. As with many of our cases, we take these cases personally. As small business owners and breadwinners, we understand the harm inflicted by oppressive and fraudulent conduct. The key point is that regardless of the form of your business, the opportunity still exists for unethical people to take advantage of minority members or partners. That’s when you need the advice and assistance of attorneys who have successfully handled shareholder oppression cases before.
Shareholder Oppression & Commercial Litigation
For cases involving shareholder oppression, squeeze outs, breach of fiduciary duties and business torts, contact the Horton Law Firm. We litigate a range of business disputes, including breach of contract and fraud. Call for a consultation at 864-233-4351.