As a general rule, shareholders are required to have an annual meeting with the business to conduct business dealings. With that, multiple things could be brought up on the agenda for the shareholders. Let’s say you have a situation where the majority shareholder of a business is basically forcing the minority shareholders to do something that could lead to a detriment of the business. There’s plenty of case law on this. Let’s say the majority shareholders are literally trying to have a hostile takeover of the corporation and force out all of the minority shareholders either because they don’t have a controlling vote or maybe because they have a subordinate type of stock, what have you.
As a general matter, it’s usually a best business practice to keep any disputes between owners of a business in-house, as much as possible. That’s why for most operating agreements on limited liability companies, they already have baked in arbitration provisions.
As a general matter, members of a LLC have two different fiduciary duties to a business. The first one being a duty of loyalty. Second one being a duty of care. A duty of loyalty is self-explanatory. It entails that a individual owner of a business will put the interests of that business before their personal interests or before the interest of any other business or any other individuals.
Depending on what the ownership interest in the business are, there could or could not be a single member of the LLC, that holds a controlling ownership interest, a controlling voting strength, and also can constitute a quorum on their own behalf.
As a general matter LLCs are governed by what’s called an operating agreement. In that operating agreement, you’ll have terms set out as far as how much someone’s ownership interest in the business is, what their percentage interest in the business is, meaning how much money or how much of a percentage of the profits of the business they are lawfully allowed to take, how much their voting strength is, the principal place of business on the operations, how member meetings go, all of those different types of things.
One of the things that’s starting to evolve in this industry are as these businesses start to go on and mature, obviously there’s some disputes that arise in between the owners of the business, whether that be because of bad business practices or maybe there’s potential theft, maybe there’s fraud that’s being committed, what have you. We’re actually going to start this conversation with dealing with a general partnership. Now as a general matter, I don’t personally create these. However, there are some businesses that do operate under this framework. When it comes to winding up that business, a partnership is put in place whenever two or more individuals come together and agree to conduct business together.
Tulsa Attorney Isaiah Brydie speaks on liability insurance and liabilities for your business and the ongoing coronavirus epidemic that’s going on in our nation. So one of the things that’s a problem that’s going on now is that a lot of businesses are thinking of what their potential liabilities would be if there was ever a tracing back of someone’s infection with COVID-19 back to their interaction with their particular business.